A N N U A L R E P O R T 2 0 0 1

2 Presentation of the Group

4 Vision and strategy

5 Summary of operations in 2001

6 Managing Director’s review

8 Hartwall’s brands

10 BBH’s brands

13 Personnel

14 Hartwall and environment

15 Research and Development

17 A look at our business in Finland

19 A look at our business

in BBH’s operational area

21 Brewing industry statistics

23 Hartwall in Finland

26 Hartwall Lahti

28 Exports and duty-free

29 Hartwa-Trade

30 Baltic Beverages Holding

The Financial Statement

47 Summary of operations in 2001

48 Board of Directors’ report

56 Income statements

57 Balance sheet

58 Cash flow statements

59 Financing risks and their management

60 Notes to the financial statements

66 Accounting principles

68 Key indicators for the Group

69 Share-issue adjusted indicators

70 Proposal for the distribution of profit

70 Auditors’ report

71 Information on Oyj Hartwall Abp’s shares

73 Investor relations

73 Analyst contacts

74 Oyj Hartwall Abp Articles of Association

76 Corporate governance

77 Board of Directors

78 Executive committee

79 Parent company, subsidiaries and

associated companies

80 Contact information

C O N T E N T S

IN

FO

RM

AT

IO

N

FO

R

SH

AR

EH

OL

DE

RS

Annual General MeetingOyj Hartwall Abp’s Annual General Meeting will be held on Monday, 8 April 2002 at the

Hartwall Areena in Helsinki, starting at 17:00. At the venue, the names of those who

registered for the Annual General Meeting will be recorded starting at 16:00, and ballots

will be distributed.

The actual Notice of Annual General Meeting was published as an advertisement in

the Helsingin Sanomat and Hufvudstadsbladet newspapers on 4 March 2002. In addition,

Oyj Hartwall Abp has sent a written invitation to each shareholder who is registered in

the Shareholder Register. The invitations were sent to the addresses provided by the

shareholders.

Shareholders who have been registered by 27 March 2002 at the latest in the

company’s Shareholder Register, which is kept by Finnish Central Securities Depository

Ltd, have the right to attend the Annual General Meeting.

Shareholders who wish to attend the Annual General Meeting must inform the

company of their intention to do so in advance in the manner indicated in the Notice of

Annual General Meeting and by the deadline specified therein.

The matters indicated in Article 11 of the Articles of Association will be dealt with at

the Annual General Meeting, along with the other matters specified in the Notice of

Annual General Meeting.

The documents pertaining to the annual accounts and the proposals of the Board

of Directors will be made available for inspection by shareholders at the company’s main

office one week before the Annual General Meeting. Copies will be sent to shareholders

upon request.

Dividend payoutProvided that the Annual General Meeting approves the Board of Directors’ proposal on

the dividends to be paid, the dividend to be paid for the 2001 financial year will be EUR

1.11 on the Series A Share and EUR 1.10 on the Series K Share. The record date is 11 April

2002 and the dividend payout date is 18 April 2002. The dividend shall be paid to

shareholders who have not transferred their shares into the book-entry system once

their shares have been transferred into the system.

Financial reports in 2002

Financial Statement Bulletin 14 February 2002

Annual General Meeting 8 April 2002

Interim Report, January-March 8 May 2002

Interim Report, January-June 8 August 2002

Interim Report, January-September 7 November 2002

Financial reports are published at 9:00 on the day in question. The Financial Statement

Bulletin and Interim Reports are posted on Hartwall’s site, www.hartwall.fi, immediately

after their release. The Annual Report and Interim Reports will be published not only in

Finnish, but also in Swedish and English. They are mailed to all shareholders.

Changes of addressShareholders are kindly requested to inform the custodian of their book-entry account

of any changes in address.

Information for shareholders

1

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

2

Hartwall’s operational concept:

Hartwall’s operational concept is to manufacture

and market high-quality beers, soft drinks, mineral waters

and other beverages for various enjoyment situations.

Baltic Beverages Holding’s (BBH) operational concept:

BBH’s operations aim to produce financial value

added for its stakeholders with high-quality products

and operating methods as well as by engaging

in financially profitable business operations.

P R E S E N T A T I O N O F T H E G R O U P

Hartwall Group in a nutshell

■ Established in 1836.

■ Finland’s leading beer and soft drinks company.

■ The associated company Baltic Beverages Holding AB (BBH) was established

in 1991. Hartwall and Carlsberg Breweries own BBH on a 50:50 basis.

■ Hartwall was listed on HEX Helsinki Exchanges on 1 July 1994.

■ Hartwall has three production sites in Finland, i.e. Helsinki, Lahti and Tornio,

as well as one spring water bottling plant in Karijoki.

■ BBH has four breweries in the Baltic countries, eight in Russia and two in the Ukraine.

■ BBH is the market leader in the Baltic countries and Russia, and ranks third in the Ukraine.

■ Hartwall exports Lapin Kulta beer to Scandinavia, Europe, the Baltic countries and Russia.

■ In February 2002 Hartwall announced its intention to join forces with

Scottish & Newcastle. The combination of Hartwall and Scottish & Newcastle

will result in a group with a leading market position in Europe.

3

P R E S E N T A T I O N O F T H E G R O U P

FINLAND

RUSSIA

Tornio

Karijoki

HelsinkiLahti Vena

Baltika

Yarpivo

Moscow

Tula

Voronezh

Baltika-Don

Zolotoy UralPikra

Production sites in Finland

BBH's production sites

UKRAINELvivskaPivovarnia

Slavutich

LATVIAAldaris

SakuESTONIA

SvyturysLITHUANIA

BYELORUSSIA

Utenos Alus

Finland Russia Ukraine Estonia Lithuania Latvia

Market position 1 1 3 1 1 1

Market share 45% 30% 18% 49% 45% 45%

Number of

production sites 4 8 2 1 2 1

Main brands Lapin Kulta, Baltika, Slavutich, Saku Svyturys, Aldaris

Hartwall Jaffa, Arsenalnoye Lvivske Utenos Alus

Hartwall Novelle

Aggregate sales,

million litres 376.3 1,907.2 259.0 48.4 108.1 60.7

Per capita

consumption of beer 79 41 25 67 66 41

4

V I S I O N A N D S T R A T E G Y

Objective:Our objective is to be Finland´s best brewing and soft drinkscompany and, through our associated company Baltic BeveragesHolding, the leading brewery in the Baltic countries, Russia,the Ukraine and other selected market areas in Eastern Europe.Our operations are generating economic value added for ourshareholders and increasing our company’s value.

Strategy:Domestic: competitiveness, innovations.International: growth.

Values:Consumer orientation: We are proactive in meeting consumerneeds thanks to our innovative product and packagingdevelopment. Our production makes sure of the high qualityof our beverage brands. Our sales and distribution see to itthat our products are conveniently available to consumersto the full extent of our product range.

Customer focus: We develop ways of working and forms ofco-operation that increase our customers’ own sales.

Good profitability: Ensuring profitability is the responsibilityof each and every Hartwall employee and it underpins all ourbusiness operations. It is the task of our sales and marketing

Business idea and objective

to realise the yield targets we have defined. Our productionand distribution must strive for optimal cost-effectiveness.

Belief in the individual: We believe in the ability and desire ofeach member of the Hartwall team to achieve their own andthe company’s objectives. Each Hartwall employee has a jobdescription that is tailored to the individual or group.Achievement of the goals is evaluated in regular feedbackand development discussions.

Responsibility: In all our dealings, we observe good businesspractices and ethics, and as a company we bear our own socialresponsibility and honour our commitment to environmentalprotection.

Financial objectives:

Hartwall BBH HartwallGroup

Volume At least in pace Faster than Stronggrowth with the market the market growth

EBIT margin-% > 10% > 20% > 18%

ROI > 18%

ROE > 18%

Equity ratio > 50%

Gearing ~ 60%

5

S U M M A R Y O F O P E R A T I O N S I N 2 0 0 1

Operations

■ The Hartwall Group’s aggregate sales volume rose to 1,605.7 million litres

(1,319.0 million litres), up 21.7% on the previous year.

■ BBH achieved a new sales volume record, 2,383.5 million litres (1,828.7 million

litres), an increase of 30.3% compared with the previous year. The company

continued to strengthen its position in its key market areas.

■ Hartwall’s aggregate sales in Finland amounted to 376.3 million litres

(368.1 million litres), up 2.2% on the previous year.

■ In Finland, Hartwall was the market leader with its market share of 45.1%

(44.9%). All product groups except beer grew.

■ Measures to centralise the production and storage functions in Southern

Finland progressed according to schedule.

■ The highest price of Hartwall’s Series A Share was EUR 24.10 and the lowest

was EUR 15.00.

Summary of operations in 2001

Key ratios

EUR million 2001 2000 Change

Net sales 807.6 612.0 +32.0%Operating profit 162.5 102.8 +58.1%percentage of net sales 20.1 % 16.8 % +3.3% ptsProfit/loss before extraordinary items 151.0 94.9 +59.1%Net profit of the year 93.0 51.5 +80.6%Earnings per share (EPS), euro 1.40 0.80 +74.4%Total assets 941.6 796.4 +18.2%Return on investment (ROI),% 23.8 19.5 +4.3% ptsReturn on equity (ROE), % 25.7 19.1 +6.6% ptsGross capital expenditure on fixed assets 248.6 162.6 +52.9%Personnel, average (BBH 50%) 6,491 6,355 +456

Total sales, litres 1,605.7 1,319.0 +21.7%

Hartwall Group aggregate sales volumes

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

million litres

BBH (50%)

Export + Duty-free

Domestic

1,605.7

1,191.8

376.3

2001

914.4

368.4

2000

1,045.0

638.8

368.2

1999

875.4

1998

456.0

378.2

762.6

1997

310.9

408.5

37.636.238.041.243.2

1,319.0

6

M A N A G I N G D I R E C T O R ’ S R E V I E W

2001 was the best year in the Hartwall Group’s history. Net sales

grew by 32% to EUR 808 million, with operating profit up 59%

compared with the previous year.

Our financial position and balance sheet remained strong

in spite of the record-breaking level of investments, which were

earmarked for ensuring the rapid growth of our associated com-

pany Baltic Beverages Holding (BBH) and centralising the pro-

duction and logistics structure in Finland.

A year of profitable growthThe largest share of the Hartwall Group’s growth andearnings improvement is attributable to BBH’s businessoperations. In the space of ten years, this brewing companyoperating in Russia, the Baltic countries and the Ukraine hasgrown into the world’s fifteenth-largest brewery in termsof volume.

The trend in the aggregate market in BBH’s territorieshas been very positive for many years running. BBH hassuccessfully increased its market share, especially in Russia,which is the world’s sixth-largest and most rapidly growingbeer market. Exchange rate fluctuations in BBH’s keycurrencies were slight in relation to the euro.

Our field of industry’s sales volume in Finland grewslightly compared with the previous year. Hartwall’s growthand earnings trend have been favourable and the companyretained its position as Finland’s most significantmanufacturer and marketer of beverages. Business operationsachieved the earnings target, but fell slightly short of thegrowth target. We exceeded our market share targets in allproduct groups with the exception of beers.

Hartwa-Trade’s business operations grew at a rapid clipand became profitable in the latter half of the year.

BBH’s number of breweries grows to fifteenDuring the report year, the trend in BBH’s business operationswas extremely favourable, with the sales volume hitting anall-time high of 2,384 million litres. Carlsberg’s Russia-basedVena was integrated into the BBH Group during the reportyear, as was the Lithuanian Svyturys brewery. BBH divesteditself of the Kalnapilis brewery due to the demands of theLithuanian competition authorities.

The BBH Group now includes fourteen breweries, ofwhich eight are located in Russia, two in the Ukraine and fourin the Baltic countries. During the report year, beerconsumption grew by 18% in Russia and by 16% in theUkraine. In the Baltic countries, growth in the consumptionfigures was more moderate, coming in at 5%. Competition inBBH’s territories tightened during the year under review, butthe company held on to its market leadership in Russia and the

A year of record-breaking growth and profitability

Baltic countries in spite of hotter national and internationalcompetition. BBH ranks third in the Ukrainian market.

The goal: market leadershipHartwall’s objective is to be Finland’s best beer and softdrinks company, and the leading brewing company in theBaltic countries, Russia, the Ukraine and selected marketareas in Eastern Europe through BBH. In Finland, we areenlarging Hartwa-Trade into a significant alcoholic beveragecompany. Our operations aim to produce financial valueadded for our stakeholders and to increase the value of ourcompany.

In accordance with our business strategy, we concentrateon strengthening competitiveness and cost-effectiveness inFinland. We will strengthen our position as Finland’s leadingbrewing company and we will profitably increase our marketshares in all product groups. We are seeking strong growththrough BBH’s business operations and growing exports ofLapin Kulta beer.

Hartwall Lahti is progressing on scheduleThe project to centralise production and storage operationsat Hartwall Lahti is progressing on schedule. The total price

7

M A N A G I N G D I R E C T O R ’ S R E V I E W

tag of this large-scale investment is EUR 225 million and itwill lead to estimated annual operational savings of EUR 17million. The project is vital for future business operations inFinland. The new production plant and logistics centre ensurethe continuity of our competitiveness and cost-efficiency wayinto the future.

Consumers deserve a reduction in the beer taxFinland has the highest excise tax on beer in the EU. It isunderstandable, then, that Finnish beer consumers import asmuch alcohol as the law allows from their tourist trips abroad.However, the situation will become worrying for the Finnishalcohol-producing industry, the retail sector, and licensedrestaurants and bars when the import restrictions are graduallyloosened over the next few years. In 2004, for example, Finnishtravellers will be allowed to import 110 litres of beer fromother EU countries.

In order to prevent the Finnish brewing industry fromdrying up due to private imports, it is essential for the beerexcise tax to be lowered closer to the European average. Thebrewing and alcoholic beverage industry expects politicaldecisions to be made soon to safeguard our domesticoperational viability in the future as well.

Consolidation in the brewing industryThe brewing industry has now undergone consolidation forseveral years running and smaller players continued to mergewith ever-larger companies. Ownership of our customers -the retail, hotel and restaurant/bar sectors - is also beingcentralised in fewer, international hands. Multinational brandsare entering the Finnish market.

In the early part of 2001, the competition authoritiesof Finland issued their decision on the terms and conditionsunder which the founding of Carlsberg Breweries could berealised. Consequently, Orkla relinquished its 21.2% stakein Hartwall in November. The Series K Shares entitling theirholders to voting rights were transferred to Hartwall-YhtiötOy. A large group of Finnish and international institutionalinvestors acquired the Series A Shares owned by Orkla.37% of Hartwall’s shares are owned by foreigners and shareturnover increased substantially towards the end of the year.

The founding of Carlsberg Breweries has no effect on theownership or line operations of BBH.

Hartwall joins forces with Scottish & NewcastleIn mid-February, Hartwall announced that it has made acombination agreement with Scottish & Newcastle, a leadingEuropean brewery. In future, Hartwall and S&N will form agroup with substantial growth potential, a leading market

position in Europe, market-leading brands that are sold allover Europe as well as experienced and expert internationalmanagers. Once established, this group will be Europe’sleading brewing company in terms of its production volumes,profitability and brands alike. Its greater financial resourceswill bolster the new company’s position as a major player inthe future consolidation of the international brewing industry.

I believe that the size of the new company and theresources available to it will help us to generate added valuefor our consumers and customers. Both companies aim toachieve a strong market position by developing excellentbrands. We are eager to start working with our newcolleagues.

Outlook for the futureIn Finland, the average consumption of soft drinks andmineral waters in particular is below the European level and itis expected that there will be further growth in these productgroups. Our beer consumption matches the European average.However, the upcoming gradual reduction of the alcohol taxwill most likely lead some of the beer consumption thatpresently falls outside official statistics in Finland to shift overto statistical consumption, increasing average consumption.We will focus on bolstering our brands and developing ourproducts, packaging, production methods and sales functionsin an innovative manner.

It is expected that the beer markets will continue to evolvevigorously, especially in Russia and the Ukraine. Growth inbeer consumption in the Baltic countries is forecast to bemore moderate. BBH’s aim is to increase its market shareand generate good earnings. Achieving higher distributionefficiency and developing distribution are also key elementsin BBH’s strategy. In addition, the acquisition of newbreweries has not been shut out as an option.

2001 was the best year in Hartwall’s history, both in termsof net sales and the operating result. I would like to thank ourshareholders, partners, customers and consumers as well asHartwall and BBH employees for your efforts on the job andyour commitment to achieving this result. Let’s make thepresent year as successful.

Jussi LänsiöManaging Director

8

Brand strategy

Hartwall is Finland’s leading brewery. As the domestic market is relatively mature, it

is Hartwall’s goal to further enhance its market position by relying on its strong brands.

In addition to Hartwall’s own brands, several well-known international beverages are

part of the company’s product line.

Portfolio strategyHartwall’s consumer-oriented brand strategy aims at offering the appropriatebeverage for every consumption situation. The company’s selection of beveragesconsists of seven different product groups, each of which has brands focusing ondifferent consumer groups. The seven product groups are beers, ciders, long drinks,soft drinks, waters, health drinks and sports drinks.

Hartwall owns most of the company’s brands and they constitute an importantpart of the company’s total value. Hartwall also represents a number of world-renowned, international brands locally through licence agreements. These brands aremaintained in close cooperation with their respective principals. Even if Hartwall’sown products are given prominence, imported beverage brands have a veryimportant role within the company’s strategy because they allow Hartwall to offerits customers a wider selection of products.

Hartwall’s objective is to remain a beverage company with strong brands. Thecompany will invest significant marketing effort and ensure that its products andpackages continue to be the most innovative in the market, offering added value toboth customers and consumers.

A house with strong brandsAll Finnish consumers of beer are familiar with Hartwall beers. In beer marketing,the significance of image is very high. Attention is given to independent, strongbrands. In addition to Lapin Kulta, the market’s best selling and best known beer,the brands Karjala, Legenda, Urho (launched November 2001), Hartwall Classic,a variety of seasonal beers and imported Kilkenny and Guinness are included in thecompany’s product line. The product family of beers marketed under the Hartwallbrand name is also being developed further. In January 2002, Hartwall Dark Lagerwas launched. In beers, Hartwall is the market leader.

In the ciders product group, Hartwall Upcider, launched in 2000, has quicklyreached second position in the market as a result of successful sales and marketingactivities. During 2001, marketing of this brand was extended to events andrestaurants. In the long drink product group, 50-year-old Hartwall Original GinLong Drink is the undisputed market leader. Other products in this group includeHartwall Otto, successfully launched in January 2002, Cool Long Drinks, and themilder Long Drink Grape.

In soft drinks, Hartwall is the market leader and is building its position on twovery solid supports. The Hartwall Jaffa product family is the flagship in this productgroup, and this brand has gained a very special place in the hearts and minds ofconsumers. Jaffa is the market’s second-best selling soft drink, and is the most-popular orange beverage. Pepsi, Pepsi Max, 7Up and Schweppes complementHartwall’s own line of soft drink products. International comparisons show thatPepsi has achieved an exceptionally-good market share in Finland during its yearsas Hartwall’s partner. Towards the end of 2001, Hartwall purchased the distributionrights for Pommac, an imported brand that Hartwall has been selling since 1950.

Within the waters product group, Hartwall bears long traditions. In this productgroup, Hartwall is the market leader and has a product line consisting of productsthat are very well known. Hartwall Novelle has become a favourite with consumersand is now the market’s best-selling mineral water. The traditional Hartwall VichyOriginal and the bottled spring water Hartwall Solina complete the company’sproduct selection in the waters product group.

H A R T W A L L ’ S B R A N D S

Lapin Kulta adopts a new

advertising strategy

Lapin Kulta has been given a new advertising

policy. Ads for Finland’s most popular beer are

now also shown on TV: Lapin Kulta’s new TV

spots were first broadcast in the last months of

2001. Lapin Kulta beer will now be highlighted

more frequently at different kinds of events and

selected sponsorship sites, without neglecting

outdoor advertising and print media, which

have previously served as the brand’s main

advertising media.

The new advertising policy seeks to hone

the image of the brand and strengthen the

position of Lapin Kulta beer both in consumers’

minds and as Finland’s best-known beer.

The new advertising policy called for careful

consideration of the marketing strategy and the

expression of the brand’s concept. The revision

of the policy has been successful and the new

policy has achieved great publicity value

amongst consumers.

9

Using the results of focused research on consumer behaviour and extensiveproduct development, Hartwall launched a new product group, Hartwall Fenixhealth drinks, towards the end of 2001. These beverages have been positioned veryaccurately and help extend Hartwall’s product offering to new types of drinks andconsumption contexts. In the future, demand for health drinks is expected to grow.

In energy drinks, Hartwall represents Red Bull, an international market leaderwhich has the position of challenger in Finland. The high-quality brand and well-organised marketing are expected to result in increased market share.

Brand maintenance and brand developmentHartwall develops its brands on the basis of good long-term planning. The goal is toincrease brand value and expand sales. Brand development is based on a continuousresearch into consumers’ needs and the innovative implementation and follow-up ofmarketing communications. All components of marketing are employed in Hartwall’sbrand management. The primary marketing channels are TV, print and outdooradvertising, with added input from advertising in cinemas, on radio and on the web.Press activities are used to supplement and support current marketing activities.A new element is the use of interactive mobile applications in connection with certainpromotions. The marketing channels and media employed are carefully selected toensure that they are correct for the products and target groups concerned.

In marketing, Hartwall takes advantage of its participation in a variety of musicand sports events, and the company also sponsors several athletes and sportsmen.These events make it possible to bring products closer to consumers and to focusmarketing communication. The most visible form of team sports is ice hockey, inwhich Hartwall is partner to Finland’s national team and to nine Finnish leagueteams. Visibility is also strong in rally driving, in which Hartwall sponsors ralliesand individual rally drivers.

Hartwall also arranges its own promotional events such as the Lapin KultaChallenge, the largest adventure sports event in Scandinavia. In Finland, the best-known target of Hartwall sponsorship is the Hartwall Areena multi-purpose hall.

In its advertising, Hartwall operates according to applicable laws andregulations. The company recognises its responsibility to society and does not seekvisibility for its alcoholic beverages at events where the majority of the audience isunder age. Hartwall does not sponsor under-age athletes in connection withalcoholic beverages.

Research and development in marketingHartwall uses continuing studies to anticipate new trends and the changing habits andfuture needs of customers. The company also uses its network of international partnersto obtain up-to-date information about the development of trends in other countries.The health drink product family introduced at the end of 2001 is a good example ofsuccessful research and development work. A growing desire to take care of one’s healthwas observed among consumers and the Fenix product family was developed to meet thatneed. Hartwall Upcider, the hit product of 2000, was also based on a careful study ofconsumers’ needs. Research can also be used to improve product launches and successin product development, as well as to shorten the time needed for development work.The development of innovative packaging is also part of marketing development sincethe results can be used to make versatile alternative packages available to consumers.

FutureHartwall intends to be Finland’s largest brewery in the future and the companytherefore places great emphasis on both marketing and on increasing the value of itsbrands. Strong brands are the response to ever-tougher challenges from both Finnishand foreign competitors.

H A R T W A L L ’ S B R A N D S

Hartwall Jaffa - success in long-term

brand development

In 2001, Hartwall Jaffa was more popular than

ever. The product’s market share achieved a

new record, and the Hartwall Jaffa product

family now accounts for 20% of the soft drinks

consumed in Finland.

The foundation for this success was laid

by long-term development of the brand. In

1999, Hartwall Jaffa’s consumer promotion

concept was renewed and in 2000, a new line

of advertising using the theme "Aito, Oikea"

(Genuine, The Right One) was adopted. In

2001, a compact Hartwall Jaffa product family

with different flavours was launched and a

uniform package design was adopted.

In 2002, Hartwall Jaffa will be further de-

veloped by the introduction of new, interesting

flavours.

10

BBH’s business is based on its very strong beer brands in the company’s home territory in

Russia, the Ukraine and the Baltic countries. BBH runs a total of 14 breweries, each of which

has its own house brand. In addition to the house brands, there are several product and

brand variations.

BBH’s stategy is to grow by acquiring existing breweries and beer brands, investingtechnology and know-how in the acquisitions and thus strengthening their businessactivities. Once production, quality, and distribution meet western standards, westernprinciples of marketing and branding will be implemented.

Portfolio strategyBBH aims at being the market leader in the territories in which it conducts business.The company will continue to emphasise the mainstream and premium segmentsin its product range. When certain well-known local brands, however, are includedin the product selection, a portfolio strategy is pursued. According to the BBH dual-branding strategy in Russia, the national brand Baltika, a beer bottled in more thanone brewery, is always part of the portfolio. Another, almost nation-wide local brandis Yarpivo. Locally-marketed beers in the product portfolio complement the mainnation-wide brand Baltika.

To maintain a competitive edge, it is important to retain a local image becausebeer markets everywhere are ruled by locally-brewed products, and imported beernever commands a large market share. BBH has decided on specific brand andportfolio strategies in each country. Brewery product families are expanded bycreating new, independent products which can be sold together with the brewerybrands. Using this comprehensive portfolio strategy, the company can offer consumersmore choice and reach out to new types of consumer. New product segments areconstantly being explored and appropriate product variations searched for.

Strong local brands enhance competitivenessBBH is clearly the market leader in Russia, and owned eight breweries in the countryat beginning of 2002. The eight breweries are Baltika, Baltika-Don and Tula (theBaltika group), and Yarpivo, Zolotoy Ural, Vena, Pikra and Voronezh. Thesebreweries own a total of nine main brands. Baltika, which has recently increased itsexports, is Russia’s leading brand and the only brand of beer which is truly nation-wide. In terms of volume, Baltika is one of Europe’s best selling beers. Another verypopular brand belonging to the Baltika group is Arsenalnoye, a product of the Tulabrewery and BBH’s second-largest brand in Russia. Other BBH breweries in Russiahave similarly boosted their sales and marketing efforts, and introduced some newproducts such as Zolotoy Ural and Sibirskaya Legenda.

In the Ukraine, BBH’s market share has grown and the company is now in thirdposition. A new product family called Lvivske was introduced using a TV campaign,and the promotional campaign for the Slavutich brand during the summer of 2001was also very successful. In addition to these main brands, other product launchesand marketing activities were carried out. Benefiting from a stronger positiontowards the end of the year, Pepsi complemented the existing product line togetherwith the international beer Tuborg. Successful marketing activity by BBH hasresulted in increased brand recognition and stronger brand positions. In the future,BBH’s objective is to create a strong national brand for the Ukrainian market.

In the Baltic countries (Estonia, Latvia and Lithuania), BBH maintained its leadingmarket position. In this geographical area, BBH brands are very well known. Productportfolios are supplemented by international beverage brands. Sales of Pepsi, Guinness,Kilkenny and Carlsberg were initiated in Estonia and Latvia. In Estonia, the country’sleading beer brand Saku became the main sponsor for Saku Suurhalli, the largest sportsauditorium in the Baltic region. A new beer "Sorts" and the cider "Kiss" were successfullylaunched and the Saku product family was supplemented by new product variations.

Brand strategy

B B H ’ S B R A N D S

Baltika - a European success story

Sales of Baltika beer have increased very rapidly

as a result of well-planned sales and marketing

efforts. In just a couple of years, Baltika has

become one of Europe’s best-selling beers.

In Russia, it is the only beer brand which has

nation-wide recognition and it is clearly the

country’s number-one beer. Successful exports

means that the brand has also gained new

friends in other parts of Europe, in the USA

and in Israel.

11

In Latvia, several new variations joined Aldaris, BBH’s most popular family ofbeers, and in the spring of 2001 the new brand Vanaga Strong was introduced. Thisbeer quickly became one of the leaders in its own segment. Sales of Kiss cider wereinitiated.

In Lithuania, a marketing project aimed at positioning the Utenos Alus andSvyturys brands was started and a new beer "Utenos Premium" was launched.Svyturys Extra won the gold medal in an international beer contest in theDortmunder category.

Brand managementThe emphasis in BBH strategy is to make the most of existing brands and developthem in ways that ensure they are competitive. When building credibility, the factthat beer is always associated with history means it is easier to work with an existingimage than attempt to create a completely new image. Recently, a more-developedsystem of brand structuring has appeared in east European markets. Brands are nowpositioned much more carefully to correspond to the needs of consumers, andproducts are aimed with increased accuracy at specific target groups. Competitionin these markets is no longer based only on price. Other methods of marketing aregaining in importance.

BBH marketing activities are conducted locally and coordinated centrally bygroup management. Local breweries are responsible for marketing, branddevelopment, and product launches. Local activity results in a more efficient responseto the demands of the local market, and also makes the breweries stakeholders in thedevelopment process. BBH has the role of an internal consultant and supportorganisation, ready to distribute know-how and tools which breweries can use.BBH also monitors and observes both the chosen profiles for different beers and theoverall appropriateness of the product line. Normal methods and advertising mediaare used in marketing. The most important media are TV and various promotionswithin the sales channels.

In eastern Europe, the process of introducing local laws to govern theadvertising of alcoholic beverages is currently in progress. As a member of localassociations of breweries, BBH is playing an active role in promoting ethically-mature policies.

Research and development to support marketingIn the future, BBH will continue to study the markets and create tools which enablethe company to identify market segments and the appropriate positioning for itsproducts. Models are created to help in determining consumers’ needs, and to makebrand management easier. Several measurement tools are used on a regular basis tomonitor sales in various channels.

The futureThe westernisation of markets and their growth means that marketing and havingstrong brands is of increased significance. In spite of this, marketing outlays in theeastern European beverage business are still smaller than those in most westerncountries. A significant feature of these markets is consumers’ lack of brand loyalty.There is a constant influx of competitors and consumers appear quite willing to tryout new products. Although these factors mean that the marketing situation is achallenging one, a marketing-oriented organisation such as BBH also has very goodopportunities to succeed.

It is BBH’s goal to increase its market leadership. BBH brands are an importantsuccess factor when the company is competing against local and internationalbrands. One important objective is to increase brand value, because this representsa significant part of the company’s total value. Strong brands will be successful incompetitive situations and earn higher-than-average revenues.

B B H ’ S B R A N D S

Slavutich receives Beer of the Year prize

In the 2001 Beer of the Year contest, the BBH

premium brand Slavutich beat all the leading

Ukrainian domestic and imported beers.

This victory was the result of a successful brand-

development process and a good sales record.

BBH is systematically restructuring Slavutich

into a strong-image Ukrainian brand. Winning

a contest of this type indicates that we must

be doing something which is exactly right.

12

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

13

P E R S O N N E L

Personnel – a success factor

Training expenses: 509,156 EUR

Accidents at work: 1,249 days

Sick leave: 13,344 days

Sex: 68% male

32% female

Average age: 41 years

During the review period, Hartwall had a total of 6,491 people on its payroll (incl. BBH

50%), of whom an average of 1,446 people worked in Finland. Hartwall’s employees

comprise an important success factor for the company. The company believes in each

individual’s drive and ability to achieve his or her and the company’s goals both as

individuals and as members of a group.

The focus areas in personnel development efforts were personnel training related tothe start-up of the new production plant, Hartwall Lahti, the development oforganisational working models and the promotion of occupational safety. During thereview period, company site-specific operating procedure projects were under way atHarwall’s Finnish production sites. Events aiming at maintaining occupationalfitness were organised at all of the business locations.

Confidence in individuals is part of the company’s valuesOne of Hartwall’s five values is "confidence in individuals." Personnel policyand principles have been defined as part of the value process.

A job description is defined with each Hartwall employee and he or she isencouraged to work in a manner that best supports the realisation of the company’slong-term objectives. Objective and development discussions are carried outannually and they comprise part of Hartwall’s management system.

Personnel strategy and key competence areasHartwall's personnel policy defines the principles that, when followed, enable thecompany and its employees to succeed most effectively. The company's entirepersonnel policy has been published on its intranet and can be accessed by allHartwall employees.

During the review period, the company began to systematically develop itspersonnel’s expertise and the management of expertise. As part of the ManagementGroup’s strategy process, a project was started up to define Hartwall’s personnelstrategy and key competence areas. The project will be seen to completion in 2002.

Support for the start-up of Hartwall LahtiEmployees have received coaching related to the start-up of the new productionplant in Lahti, especially by means of team and process training concerning the newoperating procedures, occupational safety training necessary for the new workingenvironment as well as equipment and system training. During the report year, therewere 1,663 training days, in which 327 Hartwall employees participated.

The development of compensation and bonus systems that support the newoperating procedures and encourage personnel was started up in June 2001 inassociation with personnel. It is intended that the new compensation system willbe introduced stage-by-stage in Lahti during 2002.

Incentive systemsHartwall pays competitive, agreement-based wages and salaries. A profit-sharingfund has been established for the Hartwall Group’s employees in Finland.In addition, an annual bonus hinging on the achievement of goals is used as a bonussystem for key employees. The company also rewards its long-serving employeeswith years-of-service bonuses.

BBH’s breweries have their own incentive and bonus systems.

Profit-sharing fundOy Hartwall Abp’s profit-sharing fund went active at the beginning of 1999.The members of the profit-sharing fund are employees of Hartwall and its domesticsubsidiaries. The profit bonus paid into the profit-sharing fund for 2001 is EUR 1.1million.

14

H A R T W A L L A N D E N V I R O N M E N T

Recycling and reuse of waste occupy a key position

Hartwall’s environmental policy is comprised of the environmental policy of the Finnish

brewing and soft drinks industry. In addition, the company’s own values include

accountability for the environment. Taking care of the environment is an integral part

of the brewing and soft drinks industry’s way of working.

Hartwall is committed to the principle of sustainable development. This means thatwe are dedicated to reducing the environmental impacts of our operations andcommitted to the efficient use of raw materials and energy in the development ofnew products and production methods. Our goal is to reduce environmental impactsover life cycles insofar as we can.

Recycling and reuseThe brewing and soft drinks industry has been recycling packaging materials sincethe 1910s. In 2001, 90% of the containers of all products sold in Finland werereused containers. The high percentage clearly shows that the consumers are willingto return used containers. The return rate for bottles has been almost 100% for manyyears and the return rate for returnable cans is on the rise.

At best, a glass bottle goes through the system over 30 times, while returnableplastic bottles circulate about 20 times. Virtually all the materials that are finallywithdrawn from circulation can be recycled. Glass bottles are crushed and mostlyrecycled into new bottles for the domestic brewing industry. The bottle caps, cratesand honeycombs can be used as raw material for storage boxes, shelves and pallets.

In 2001, the total amount of energy produced from such recycled waste was1,394 tonnes, of which 732 tonnes consisted of used bottle labels. The recentmethod of recycling the labels has dramatically reduced the total amount ofunrecycled waste.

The load rate of vehicles has improvedThe main environmental impact from transportation comes from the exhaust gases.Hartwall has been able to improve the load statistics of vehicles and pallets throughmore careful management of the logistics. In addition, customer-specific deliverysorting has helped reduce the parking time of the transport vehicles at customers’loading platforms. This has made the deliveries faster than before. In conclusion, allthe above-mentioned procedures have reduced the total number of delivered loads,which in turn has reduced pollution.

The total number of delivery vehicles has decreased by 50% in ten years, and thetotal number of driven kilometres has decreased by 20%.

Focus on energy and water at Hartwall LahtiThe Hartwall Lahti project has followed the company’s environmental objectivesfrom the very start. A part of the savings derived from this project come from thereduction of emissions into the environment. The objective for the new factory isto reach a significantly lower level of emissions than that of the existing factories inHelsinki and Lahti together.

Several specific goals have been set for the consumption of water and energy.The statistical targets are set at approximately 15% below the corresponding keystatistics for today’s operations. It has been borne in mind, however, that Hartwall’sexisting production facilities are environmentally fairly safe in internationalcomparison.

The implementation of the environmental goals has meant that the choices ofmachinery, equipment and processes in the new factory have been made with anemphasis on the resulting consumption of water and energy. Natural gas has beenselected as the main source of energy. The bottle washing machines of the newbottling lines consume approximately 30% less water than current machines andthe implementation of new technology in the boiling process will reduce the specificenergy consumption by nearly 50%.

Materials directed to recycling and reusefrom Finnish operations in 2001

Material Tonnes

Glass bottles 3,486

Plastic bottles, crates,

caps, honeycombs, etc. 1,833

Paper and cardboard 400

Metal cans, kegs and dollies 38

By-products of brewing Tonnes

Mash 35,344

Yeast (dry weight) 616

Kieselguhr (dry weight) 330

Amount of unrecycled waste

Year Tonnes

1999 3,127

2000 2,247

2001 1,765

For the first time, the statistics for 2001 are inclusive of all Finnish

operations.

15

R E S E A R C H & D E V E L O P M E N T

Significance of innovations increases

Hartwall Fenix health drinks launched

At the end of 2001 Hartwall launched Fenix

health drinks, a totally new product group of

non-alcoholic beverages.

Research and development operations (R&D) aim to support Hartwall’s operating

processes in such a manner that the company can tap into the evolution of technology

and techniques to improve its competitiveness. The company engages in R&D in all of

its core processes. The focus is on production and especially on product and packaging

development. In addition, the R&D unit provides expert assistance on quality, environ-

mental and safety issues.

Research is guided by a technology programmeR&D operations are guided by a technology programme that is updated annuallyand approved by Hartwall’s Management Board. The programme covers thecompany’s entire delivery chain. Particular attention is paid to raw materials, thefermentation process and the manufacture of various fermented products. One ofthe major research achievements is the introduction of immobilisation technologyin the storeroom fermentation of beer, which speeds up the fermentation process.In addition, the technology programme has been utilised extensively in the imple-mentation of the Hartwall Lahti project. Hartwall does not carry out research of itsown in other areas of the delivery chain; rather, the company works inco-operation with Panimolaboratio Oy, VTT and other research institutes andsuppliers. Parties such as TEKES and Nordisk Industrifond have provided fundingfor the technology programme.

Packaging included in product developmentR&D activities are focused on the product development of beer, other alcoholicbeverages and non-alcoholic beverages. In 2001, R&D efforts were expanded tocover packaging. In addition to the R&D unit, the sales, marketing and productiondepartments participate in this effort. In addition, the R&D unit provides supportin quality and technology issues to line operations. In 2001, strong outlays weremade on the further development of cider and long drink manufacturing processes.Hartwall developed a new product group for the non-alcoholic beverages segment -health drinks, for which a distinct need had been noted amongst consumers.

Packaging development is now playing an ever-greater role in the company’scompetitiveness. In particular, it has turned out to be more important than everto engage in the controlled development of new multipackaging alternatives whileretaining production flexibility and productivity. Successful packaging developmentcan foster sales. Finland’s well-run bottle and can recycling system requires thecompany to co-operate extensively with the trade in packaging development. Suchco-operative efforts are carried out in the framework of PATEVA, the brewingtechnology committee of the Finnish Federation of the Brewing and Soft DrinksIndustry. The introduction of a honeycomb panel system for integral packages andmultipacks may be considered the most significant development in recent years.Hartwall has patented the innovations generated during packaging development.

In technical development, the most important task is to lend expert supportfor the company’s technical investments. Recently, technical development operationshave concentrated fully on the implementation of the Hartwall Lahti project.The same can be said of the development of quality, environmental and securitysystems.

Consumer services become more importantThe development of consumer services and attending to practical operations havebeen among the tasks of the R&D unit since 1993. The consumer services depart-ment processes feedback and channels this information onwards for use inthe company’s line operations. The significance of feedback has grown continuously;the HAKU information system was created to upgrade efficiency in this area, and ithas turned out to be an excellent tool for the processing of feedback. One of thechallenges facing Hartwall Lahti is the utilisation of information gleaned fromconsumer feedback in production quality assurance as well.

16

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

17

Last year was a good one for the domestic beverage industry. Consumption of both

alcoholic beverages and soft drinks increased and the industry achieved all-time record

sales. Aggregate volume increased by 13.9 million litres or more than 2.5 litres per capita.

The industry’s largest product groups exhibited the most powerful growth.

The new record in aggregate sales was 833.6 million litres (819.5 million litres),annual growth of 1.7 per cent. After a sluggish period during the first six months ofthe year, sales by the brewery industry picked up vigorously in the favourableweather conditions of July and August.

The four most important product groups (medium-strength beer, soft drinks,mineral waters and medium-strength cider) gained in popularity. With the exceptionof the solid long drink category, the most modest growth figures were observed inthe smallest product groups.

Over the past ten years, sales of beverages have increased by approximately150 million litres - almost 30 litres for every Finnish consumer. During this period,the soft drinks sector in particular has grown by a total of 47.6%. The share of ofthe aggregate market taken by soft drinks and mineral waters is now 42.8%, whichmeans that during the last ten years, growth has totalled 7.5 percentage points.

Fastest growth was in litres of beer soldAggregate sales of beer in 2001 totalled 408.5 million litres, with growth of 6.1million litres or 1.5%. Although the increase in sales was not the fastest in theindustry when measured in percentage terms, this category showed the industry’smost powerful growth in terms of volume.

When categorised by alcohol content, medium-strength beer continues todominate the Finnish market, taking a 90.1% share of total sales. Retail storescontinued to be the most important distribution channel, accounting for 68.5%of Finnish beer sales.

In 2001, the share of sales held by retail stores grew by 1.5 percentage points,something which can probably be explained by new laws which allowed longeropening hours. As in previous years, the number-one favourite sales unit in thisdistribution channel was the multipacks which accounted for approximately half oftotal sales.

Sales of medium-strength beer in 2001 grew by 7.2 million litres or 2.0%. Interms of alcohol content, the most significant drop in demand (2.7%) was in thestrong beer category. This was the result of private importation by consumers fromforeign countries and purchases in tax-free outlets.

The statistic for per-capita consumption of beer was 79 litres in 2001. Accordingto research, the share of consumption not included in the statistics was slightly morethan 10 litres.

Share taken by orange-flavoured soft drinks became more importantSoft drinks, the second-largest product group after beers, continued to sell very welland the total volume in 2001 was 297.2 million litres (293.0 million litres).A mostly-good summer season resulted in growth of 4.2 million litres or 1.4%.

In terms of flavour, although orange was the fastest growing segment at 4.9%,cola is unmistakably the most important flavour with a market share of 45.0%.Light soft drinks continued to enjoy a steady growth in popularity. Almost 25%of all soft drinks belong in this category.

The 1.5 litre bottle was by far the most popular bottle size and now commandsmore than 80% of sales in retail stores. The national statistic for the aggregateconsumption of soft drinks in Finland was 57 litres per capita.

A record-breaking year for the brewing industry

A L O O K A T O U R B U S I N E S S I N F I N L A N D

Aggregate sales volumein Finland 1997-2001

Others, total Hartwall

900

800

700

600

500

400

300

200

100

0

0100999897

724.8 722.4

830.7 819.5 833.6

million litres

394.

6

380.

4

371.

2

368.

4

376.

3

330.

2

342 45

9.5

451.

1

457.

3

Trend in beer salesin Finland 1997-2001

Others, total Hartwall

450

400

350

300

250

200

150

100

50

0

0100999897

417.1 408.4 408.7 402.3 408.5

million litres

214.

5

200.

8

196.

3

185.

6

182.

1

202.

6

207.

6

212.

4

216.

7

226.

4

18

Mineral waters register the fastest growth in percentage termsThe mineral waters product group exhibited the most powerful growth in theaggregate market in percentage terms. This group is the industry’s third largest, withtotal sales of 59.5 million litres. The 2.4 million-litre increase in consumption in2001 represented a growth rate of 4.3%.

Beverages in this product group are divided into three segments: unflavouredmineral waters, flavoured mineral waters, and traditional Vichy mineral waters.Demand for flavoured mineral water has grown in the last few years. Unflavouredand flavoured mineral waters have almost equal shares and represent approximately80% of the market.

The national statistic for consumption of mineral waters was 11 litres per capita.

Cider market shows evidence of stabilisationGrowth in the cider market continued in 2001 but at a slower rate than in previousyears. The aggregate sales volume reached 51.4 million litres with a growth rate of2.8%. A period of lower growth rates was not unexpected, since the popularity ofcider had increased tenfold within just a couple of years.

Today’s cider market began to take shape in 1995 when the sale of this class ofbeverages was first allowed in retail stores. In 1996, aggregate sales of ciders andlong drinks were approximately the same, but by 2001, the volume of cider sold wasthree times that of long drinks.

The national statistic for cider consumption in Finland in 2001 was 10.9 litresper capita. In international terms, the Finns are second after the Irish.

Long drinks are a moderate sellerLong drinks were the only product group in the beverage industry that exhibited aslight drop in sales. The aggregate sales for this product group totalled 16.9 millionlitres (17.2 million litres), 1.6% less than in the previous year.

A favourable trend in this product group was the increased popularity of the 0.5litre bottle. Other positive trends were increased sales via Alko stores, and animprovement in demand for alcoholic beverages containing more than 4.7 per centalcohol by volume.

The national statistic for the annual consumption of long drinks in Finland in2001 was three litres.

A L O O K A T O U R B U S I N E S S I N F I N L A N D

Trend in mineral water salesin Finland 1997-2001

Others, total Hartwall

60

50

40

30

20

10

0

0100999897

45.451.0

58.2 57.0 59.5

million litres

22.3

25.2 27

.7

28.7

30.5

23.1 25

.8

30.5

28.3 29

Trend in cider salesin Finland 1997-2001

Others, total Hartwall

60

50

40

30

20

10

0

0100999897

23.3

53.2

45.850.0 51.4

million litres

4.9 5.6 9.5 16

.4

17.118

.4

47.6

36.3 33

.6

34.3

Trend in soft drink salesin Finland 1997-2001

Others, total Hartwall

300

250

200

150

100

50

0

0100999897

262.4 256.8

298.8 293.0 297.2

million litres

157.

8

136.

1

126.

5

126.

8

135.

3

104.

6

120.

7 172.

3

166.

2

161.

9Consumption of alcoholic beverages 1995-2001

16

14

12

10

8

6

4

2

0

9998979695

13.112.5 13.0 13.2

13.6

Litres per capita

00

13.9

Table wines

Forified wines

Spirits

14.7

011)

Source: STAKES National Research andDevelopment Centre for Welfare and Health, 2002

1) Preliminary data

Consumption of beverages

180

160

140

120

100

80

60

40

20

0

9998979695

140.4 144.9153.6 151.2

162.2

litre/person

00 01

160.3 160.9

Mineral water

Soft drinks

Long Drink

Cider

Beer

19

The trend in the business environment was favourable in all of BBH’s territories in 2001.

The financial and political situation continued to stabilise. Beer consumption was increased

by the greater purchasing power of consumers and the shift in beer consumption habits

towards Western habits. The centralisation of the brewing industry continued, as the largest

breweries claimed larger shares, with smaller players losing ground.

The field is also going strongly international and over half of the beer markets inall of BBH’s territories are already held by international players. A greater numberof breweries have upgraded the quality of their beer to a Western level, and thusmarketing, sales and distribution are emerging as the new success factors.

Retail chains have spread very rapidly in the Baltic countries and the first signsof the emergence of chain stores are also evident in the largest cities of Russia andthe Ukraine. This leads to pressures for changes in how the key customers of thebreweries, sales and marketing are attended to as well as in cost-efficiency.Previously, the main goal was to grow at as fast a rate as possible.

The availability of domestic ingredients and materials has improved in generaland thus the risks inherent in exchange rate fluctuations have declined. There is stilla shortage of malts, the most important raw material, in Russia, and the quality ofthe malt barley in the Ukraine only partially measures up to Western standards.Farming is in a weak state; sustained and extensive efforts will have to beundertaken to improve agricultural viability so that malt barley that meets Westernquality standards will be available.

RussiaThe trend in the Russian economy remained favourable, but growth was slightlymore moderate than in the previous year. Inflation amounted to 18.6% during thereport year and unemployment declined compared to 2000. The good trend inexports of oil and raw materials had a positive effect on the country’s economy andthe GNP grew by about 5.7%. Repayments of Russia’s foreign debt have progressedaccording to plans.

The developed financial situation is visible in the improved purchasing powerof consumers, especially in the cities and residential centres, but development inrural areas was slower. Conditions have stabilised during Putin’s presidency, andrapidly evolving legislation has had a positive effect on business activities. The landreform instituted in 2001 is expected to improve the preconditions for thedevelopment of the economy and pave the way for additional investments. As fromthe beginning of 2002, the corporate tax base was lowered to 24 per cent and theentire taxation system was simplified. This is a welcome reform, although the taxbreaks granted due to BBH’s large-scale investments were discontinued.

The growth of the brewing industry in Russia was especially brisk, althoughit slowed down towards the end of the year. In 2001, the beer market grew by 18%,with the aggregate market amounting to 6,146 million litres (5,225 million litres).Imports accounted for about 1.5% of the market. Consumption per capita rose to41 litres (35 litres). With these figures, Russia overshot the UK in aggregateconsumption and is now the sixth-largest beer market in the world. The field hasalready centralised and large, international companies hold 52% of the market.The growth in the brewing industry’s outlays on the market was conspicuous.

Sales of local premium beers saw the greatest growth, achieving a 12% shareof the aggregate market, and a share of as much as 20-25% in the largest cities.There was further growth in the share of sales accounted for by beers sold in thedisposable PET plastic bottles typical of the Eastern European market.The popularity of beer in cans, which previously suffered from a poor image,is rapidly increasing, and at the end of 2001 the segment had a 5% share of themarket. The popularity of alcohol-free beer was also on the rise during the reportyear, while the market share of strong beers (over 8%) slid slightly in the largestcities. In addition, licensed local manufacturing of foreign beers increased.

A L O O K A T O U R B U S I N E S S I N B B H ’ S O P E R A T I O N A L A R E A

The beer market grows, centralisation in the field continues

20

A L O O K A T O U R B U S I N E S S I N B B H ’ S O P E R A T I O N A L A R E A

A new, rapidly-growing segment emerged on the market:high quality domestic premium beer. Lower-quality local beersare losing ground. Mainstream beer also occupies a strongposition on the market, accounting for over half of sales.

It is estimated that the trend in the Russian economy andthe beer markets will continue to be positive in the future, butthat growth will be more moderate than in the previous year.

UkraineThe Ukrainian economy also continued to develop favourably.The growth in GNP exceeded expectations, reaching 9.1%,and the Ukrainian hrivna strengthened slightly during thereport year. Inflation was 5.8% in the year now ended andindustrial production was up 14%. The standard of living inthe region has continued to rise and beer consumption hasalso increased.

The trend in the field of business was positive in 2001and the profitability of breweries in general has improved.The aggregate market continued to grow, rising from 1,032million litres to 1,200 million litres, representing growth of16%. Per capita consumption in the country is now 25 litres,which is low in international terms. The share of beer salesaccounted for by beers in PET plastic bottles rose from 15 to21 per cent. The industry is highly centralised in the Ukraineas well, and at the end of the year the three largest breweriesheld over 70% of the beer market. Imports account for 1%of sales. The most-sold beer segments on the market aremainstream and premium.

Aggregate sales of soft drinks developed by 21% in theUkraine and the aggregate volume was 573 million litresin 2001.

The Ukrainian economy follows trends in Russia - albeitlagging behind significantly - and it is expected to developfavourably in the future. The brewing industry has greatgrowth potential and the population base is substantial, closeto 50 million inhabitants.

The Baltic countriesThe development of the Baltic countries remained positiveand they evolved strongly towards EU worthiness, which is apositive trait for business operations. The Baltic countries areby far the most developed of the Eastern European markets.The financial position of the countries is stable and thepurchasing power of consumers is already quite high.The internationalisation and centralisation of the brewingindustry have been very much in evidence in the Balticcountries and the markets are clearly held by large breweriesowned by foreigners. Retail chains have also spread veryrapidly, most extensively in Lithuania. The developmentof environmental taxation continued slowly to approachEuropean practices.

The aggregate beer market in the Baltic countries totals424 million litres, up 5% compared with the previous year.Average beer consumption in these countries is 57 litres.

Aggregate sales of soft drinks in the Baltic countries grewby 13% and the aggregate volume was 232 million litres in2001. Sales of mineral waters developed by 22% to 181million litres.

Economic growth continued in Estonia, but slowed downtowards the end of the year. The GNP was up 4.3% andinflation was 5.8%. The country’s brewing industry is highlyevolved. No disposable plastic bottles are used in Estonia,unlike in the other Eastern European countries. The Estonianbeer market grew by 4% to 91.8 million litres, with per capitaconsumption rising to 67 litres. Over 80% of the Estonianbeer market is held by the two largest brewing companies,and imports represent 4% of the market.

The Lithuanian economy continued to grow favourably,primarily thanks to increased exports, and the GNP was up4.8% with inflation amounting to 1.3%. The beer marketgrew by 5% during the year now ended, with the aggregatemarket hitting 231 million litres and per capita consumption66 litres. Due to the centralisation of the retail sector, abouthalf of the retail volume is controlled by various chains.The three largest breweries have a share of over 70% of theregion’s market, and imported beers account for 2% of sales.

The Latvian GNP was up 7% and inflation amounted to2.5%. The beer market volume grew by 6% to 101.2 millionlitres (95.5 million litres). Consumption per capita increasedfrom 37 to 41 litres. The share of the market held bydisposable plastic bottles is very large. Unlike in the otherBaltic countries, the market has not undergone consolidation.The largest brewery has a market share of about 45% and therest is distributed evenly among numerous breweries. Importsaccount for 5% of sales.

21

Brewing Industry Statistics

Beer excise, EUR/litre (5% alc.vol.) VAT %

Norway 2.23 24

Finland 1.43 22

Ireland 0.99 20

United Kingdom 0.96 17.5

Sweden 0.88 25

Denmark 0.46 25

Austria 0.25 20

Netherlands 0.21 17.5

Belgium 0.21 21

Estonia 0.18 18

Italy 0.17 20

Switzerland 0.15 7.6

Greece 0.14 18

Portugal 0.14 17

France 0.13 19.6

Germany 0.09 16

Spain 0.08 16

0 0.5 1 1,5 2 2.5

Beer excise and VAT in various countries 2001

litres/person

Czech Republic 159

Ireland 128

Germany 126

Austria 108

Denmark 102

Belgium 99

United Kingdom 95

Slovakia 87

Netherlands 83

Finland 78

Spain 72

Switzerland 58

Sweden 56

Norway 52

Greece 43

France 36

Italy 28

0 20 40 60 80 100

Consumption of beer 2000

120 140 160

litres/person

Ireland 121

Norway 116

Czech Republic 110

Spain 98

Belgium 94

United Kingdom 90

Germany 86

Denmark 85

Netherlands 84

Austria 84

Switzerland 79

Sweden 72

Greece 64

Finland 57

Slovakia 52

Italy 50

France 39

0 20 40 60 80 100

Consumption of soft drinks 2000

120 140

litres/person

Italy 140

Belgium 124

Germany 99

Switzerland 97

France 92

Spain 87

Austria 80

Netherlands 17

Norway 17

Sweden 17

Finland 11

Denmark 8

Consumption of mineral water 2000

0 20 40 60 80 100 120 140

litres/person

Ireland 17

Finland 10.9

United Kingdom 8.6

Sweden 2.3

France 2

Spain 1.8

Germany 1.1

Belgium 0.6

Denmark 0.2

Consumption of cider 2000

0 2 4 6 8 10 12 2014 16 18

B R E W I N G I N D U S T R Y S T A T I S T I C S

Source: The Finnish Federation of the Brewing and Soft Drinks Industry

22

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

23

Sales by Hartwall in Finland developed more favourably than the industry’s aggregate

market. While the company’s aggregate market share was 45.1%, its share of the

aggregate growth was much higher at 57.4%. As all Hartwall’s beverage product groups,

with the exception of medium-strength beer, were more successful than the aggregate

trend, the company retained its market leadership.

Total sales in 2001 amounted to 376.3 million litres, 8.0 million litres more thanin the previous year, representing growth of 2.2%. The ratio of alcoholic to non-alcoholic beverages in the aggregate sales figures was 6:4. The fastest growth interms of sales volume (6.6%) was exhibited within soft drinks, and the strongestimprovement in market share (4.1 percentage points) as in the long drink productgroup.

During the year, Hartwall conducted a number of product developmentprocesses. At least one full product-development cycle was completed within eachproduct group.

Karjala was the most successfulThe company’s beer sales totalled 182.1 million litres, a decrease of 1.9 per centcompared to the previous year. In spite of the drop in sales, Hartwall’s market shareof 44.6 per cent (46.1%) in the beer trade is the highest in the industry. The mostsuccessful brands were Karjala and Lapin Kulta.

Sales of Lapin Kulta, the company’s most important brand, were at the previousyear’s level and Lapin Kulta retained its market leading position in this productgroup. As the aggregate market grew during the review period, Lapin Kulta’s marketshare decreased. In terms of sales, Karjala achieved the best result with a growthrate four times higher than that of the aggregate market.

In accordance with the new beer strategy, Lapin Kulta was showcased on TVusing the first actual brand advertisements in its history. The campaign, kicked offin October, was the year’s largest in Finland, both in terms of costs and contacts.

In terms of distribution channels, sales by Hartwall in restaurants and bars werethe most successful in the industry. In terms of package types, the company achievedits best aggregate results in sales of beer in 0.5 litre bottles, cans or other containers.

In beers, product development efforts were focused on new products. Urho beer(5.5% alcohol by volume) was launched in November, and Hartwall Dark Lager, anew member of the Hartwall beer family, was launched at the beginning of 2002.

The only company to achieve growth in soft drinksHartwall was the only company in the market that succeeded in improving sales ofsoft drinks. Sales totalled 135.3 million litres, an increase of 8.4 million litres involume terms and growth of 6.6%. Hartwall’s share of the aggregate market for softdrinks improved by 2.4 percentage points to 45.5 per cent (43.1%).

Sales in both national and international brands were very good. Hartwall Jaffa,Hartwall Limonadi and Pepsi clearly outperformed the aggregate market. There arenow five Hartwall products or product families among the ten most-popular brandsof soft drink.

According to the general opinion of Finns, Hartwall Jaffa is absolutely thenumber-one brand in soft drinks and the brand has a much higher value than anyother domestic or international soft drink. This fact was confirmed in a researchproject carried out by Taloustutkimus Oy in cooperation with Markkinointi&Mainonta magazine.

Pepsi products entered Hartwall’s product line in 1999. Since then, sales of thesebeverages have risen by 65 per cent.

Hartwall’s Digimon soft drinks for children were launched at the beginning of2001. Towards the end of the year, the brand rights to Pommac, a soft drink thatHartwall has been producing since 1950, were purchased from Carlsberg Sverige AB.

Hartwall’s position as market leader strengthened

H A R T W A L L I N F I N L A N D

Total market positionsin Finland 2001

Hartwall 45.1%

Sinebrychoff 43.5%

Olvi 11.2%

PUP 0.2%

Beer market positionsin Finland 2001

Hartwall 44.6%

Sinebrychoff 42.8%

Olvi 12.4%

PUP 0.2%

24

New product group launchedAt the beginning of 2002, a new family of health drink products called HartwallFenix was introduced to the market. A completely-new product group, the launchwas based on an extensive product development process completed in 2001. Healthdrinks combine health and good feeling are for use in a variety of everyday situa-tions. In contrast to drinks intended for special circumstances, the new healthdrinks are designed for everyday use and contain ingredients that are beneficial tohealth. The ingredients have been selected according to different consumptionsituations.

According to recent research, almost 30% of Finns now buy health-orientedfood and grocery items for their households and the new product group thereforehas a solid consumer audience. Hartwall Fenix Piristävä can be drunk as areplacement for coffee, and Hartwall Fenix Palauttava is an appropriate drink toenjoy after an exercise session. Both beverages are also safe for diabetic patients asthey are completely lactose- and gluten-free.

Hartwall Novelle, the pacesetter in its product groupSales of mineral waters reached 30.5 million litres, growth of 64% compared tothe previous year. Hartwall’s share of the growth in what was the industry’s fastest-growing product group in 2001 was three quarters. Market share rose by onepercentage point to 51.4 per cent (50.4%).

Over the past ten years, the aggregate market for this product group has almostdoubled. The most important single reason for the growth has been the rapidincrease in demand for flavoured mineral waters.

The clear market leader in this product group continued to be the HartwallNovelle product family, which consists of five different products - four flavouredmineral waters and one unflavoured. The newest member of this product family isHartwall Novelle Passion Apricot.

A wide selection of cider flavoursSales of ciders grew by 4.6% to a total of 17.1 million litres. The relatively hightarget sales volumes were not quite achieved because the growth forecast for theaggregate market turned out to be higher than the actual growth. Hartwall’s marketshare rose to 33.3%, an improvement of 0.6 percentage points.

The Hartwall Upcider product family launched in 2001 included seven differentall-year-round ciders and one cider variation for the Christmas season.

During the review period, two new members, Hartwall Upcider Light Raspberryand Hartwall Upcider Perry Guarana, joined the product family. In the spring of2001, a multipack of four 0.5-litre bottles was launched for the product line.

H A R T W A L L I N F I N L A N D

Domestic sales of the brewing and soft drinks industry

Industry, Change, Hartwall, Change, Hartwall Change,million litres % million litres % market share %-pts.

Beer 408.5 1.5 182.1 -1.9 44.6 -1.5

Cider 51.4 2.8 17.1 4.6 33.3 0.6

Long drink 16.9 -1.6 11.2 4.8 66.2 4.1

Total 476.8 1.5 210.5 -1.1 44.1 -1.2

Soft drinks 297.2 1.4 135.3 6.6 45.5 2.4

Mineral water 59.5 4.3 30.5 6.4 51.4 1.0

Total 356.7 1.9 165.9 6.6 46.5 2.0

Beverages, total 833.6 1.7 376.3 2.2 45.1 0.2

Soft drink market positionin Finland in Finland 2001

Hartwall 45.5%

Sinebrychoff 47.6%

Olvi 6.9%

Mineral water market positionin Finland 2001

Hartwall 51.4%

Sinebrychoff 21.8%

Olvi 26.4%

PUP 0.5%

Cider market positionin Finland 2001

Hartwall 33.3%

Sinebrychoff 54.0%

Olvi 12.3%

PUP 0.4%

Long drink market positionin Finland 2001

Hartwall 66.2%

Sinebrychoff 30.8%

Olvi 3.0%

25

H A R T W A L L I N F I N L A N D

The market shares in daily convenience goods store in all Finland (vol.), 2001

Finnish Beers Top Ten

0.9

0.9

3.1

3.3

4.1

7.6

9.7

11.2

27.2

27.4

0 5 10 15 20 25 30

Koff Light Beer

Hartwall Classic

Olvi Sandels

Olvi CXX

Legenda

Olvi Special

Karjala

Koff

Karhu

Lapin Kulta

Finnish Soft Drinks Top Ten

1.9

2.2

3.0

4.3

6.7

6.9

10.5

16.5

18.3

23.1

0 5 10 15

Pommac

Pirkka

Hartwall limonadi

Seven Up

Olvi Classic

Sprite

Fanta

Pepsi

Hartwall Jaffa

Coca-Cola

20 25

Finnish Ciders Top Ten

0.2

0.2

0.2

0.4

0.4

0.6

9.0

15.2

27.4

45.6

0 10 20 30

Wihuri

Hellefors

Drinkit

Strongbow

Pup Nokia

Rainbow

Kopparberg

Fizz

Hartwall Upcider

Golden Cap

40 50

Finnish Mineral Water Top Five

8.4

10.3

19.9

23.1

36.4

0 10 15 25

Hartwall Vichy

Olvi Vichy

Bon Aqua

Olvi kevytolo

Hartwall Novelle

35 405 20 30

Source: A.C. Nielsen

Market for long drinks receives a wake-up call from OttoIn spite of the fact that the aggregate long drink market shrank by 1.6 per cent in thereview period, Hartwall was able to improve its own sales by 4.8% to 11.2 millionlitres. The market share increased by 4.1 percentage points to 66.2%.

Hartwall enjoys an exceptionally-good 79.9% of the market for stronger longdrinks; and this is particularly visible in sales via Alko stores where market share hasreached 89.8%.

Marketing input into long drinks by the brewery industry has been comparativelymodest for several years. As a result, consumers interest in this product group hasdeclined. As a leading player in the industry, Hartwall started product developmentat the end of 2000 with a view to revitalising the aggregate market for this product.Otto, a new long drink was developed during 2001 and was launched at thebeginning of 2002. The alcohol content of Otto is medium-to-strong, and it isavailable in two flavours, grapefruit and lime.

26

In 1999, Hartwall’s Board of Directors decided to concentrate the production and storage

functions covering Southern Finland next to its current logistics centre in Lahti.

The production plant that is now under construction will phase out the company’s

present production plants in Helsinki and Lahti.

In future, Hartwall will carry out production operations not only in Lahti, but also inTornio, where it brews Lapin Kulta beer, and in Karijoki, where it bottles springwater. The new production plant and logistics centre will be completed in the springof 2003.

This is Hartwall’s largest investment in Finland to date. The centralisationinvestment is valued at EUR 225 million. The annual operational savings that willresult from the project are estimated to reach EUR 17 million.

By means of this project, Hartwall is ensuring its future operational viability andcompetitiveness in Finland. The centralisation of production and storage functionsboth in terms of geographic location and logistics enables the company to achievegreater operational flexibility and better cost-efficiency. In addition, special attentionwill be paid to the comfort of employees and teamwork at the new production plant.

On the whole, the Hartwall Lahti project is large and challenging. Hartwall’scorporate image and the requirements its image sets on the project have been takeninto consideration in the design of the production plant. At this new productionplant, quality assurance will be raised to an unprecedented level. Attention toenvironmental affairs is also a key aspect of the new plant.

The beverage factory of the futureThe plot of Hartwall Lahti measures 32 hectares. In terms of its transport connec-tions, it is ideally located, as the triangular plot is bordered by a through roadleading from Helsinki to the north, the east-west highway 12 (Kouvola-Tampere)and a railroad. Hartwall acquired the plot in 1991, and the first stage of Lahtilogistics centre, a production and distribution warehouse, was inaugurated inOctober 1993. Since then, construction has progressed systematically and hasremained on schedule. Only a few more months of construction work are now left inthis large-scale project.

The total floor area of the new production plant and logistics centre will beabout 150,000 square metres. Different types of storage premises and relatedfunctions will be established on about half of the surface area of the entireproduction plant. The receiving of bottles and cans and the collection anddispatching of loads will be handled on these premises.

Hartwall Lahti is so large that the distance from one end of the building tothe other is about half a kilometre.

The project will be completed in 2003Collection, distribution, automated storage, office and social premises have alreadybeen built on the plot in previous years, along with technical storage facilities andlight-structure halls for empty bottles and cans. To date, premises for the processing,refilling and sorting of bottles and cans have been completed in the project. Premisesfor the storage of products and the internal logistics of the production plant are alsonearing completion. The internal material flows of a production plant of this size arelarge, and for this reason the design pays particular attention to internal logistics andtheir efficiency.

The first two bottling lines of the new production plants were installed lastautumn, and the stage-by-stage transfer of the present soft drink manufacture andsorting operations in Lahti on to the new premises was started up in January 2002.

The transfer of Helsinki’s production, storage and distribution functions into thenew building will begin in the autumn of 2002. Plans call for the completion of thisstage in the spring of 2003. Lastly, the brewing functions of the present factory inLahti will be transferred into the new facility.

Hartwall Lahti will be completed on schedule

H A R T W A L L L A H T I

27

H A R T W A L L L A H T I

28

Hartwall’s export products maintained

their positions in their target markets

in 2001. Hartwall’s aggregate export

volume was 18.1 million litres (17.8

million litres). The value of the

exports was EUR 11.4 million (EUR 11.8

million). Sweden remains the largest

export country, but the trend in the

markets of Russia and Estonia has also

been favourable. Hartwall’s duty-free

sales increased by 6.5 per cent.

ExportsOyj Hartwall Abp’s export operationsprimarily comprise exports of LapinKulta beer to countries in the Balticarea and selected European markets.In 2001, Hartwall Upcider and AquaFennica spring water also becameexport products.

Sweden is still Hartwall’s most important export marketby far, and the company enjoys a stable position there. In2001, exports to Sweden amounted to 13.9 million litres(13.7 million litres). Lapin Kulta has held on to its dominantposition as the most popular and highest-volume importedbeer in Sweden since the mid-90s. In 2001, Lapin Kulta wasalready competing head-to-head with Swedish beers. Theprofitability of exports to Sweden was not, however, at asgood a level as before due to the poor exchange rate of theSwedish krona.

Advertising of Lapin Kulta beer in Sweden is focused onoutdoor advertising. The advertising policy has been honedfor even greater appeal to younger adults.

Sales in Russia had declined for several years running, butbegan ascending slightly again in 2001, reaching 2.4 millionlitres (2.3 million litres). The Russian beer market has grownbuoyantly, and sales of imported beers have also increased.Conditions in the country and the disposable income of itscitizens evolved favourably. Export measures for Lapin Kultabeer focused on St. Petersburg and Moscow. In St. Petersburg,Lapin Kulta is one of the best-known imported beers.

The Estonian beer market grew and during the reviewperiod Hartwall achieved its highest sales volume ever, closeto one million litres. Of this amount, 400,000 litres were beer.The company changed over to a new Estonian importer inApril 2001. The new importer is the independent alcohol salesagency Tridens, which has exclusive rights to sell all Hartwallproducts in Estonia. The changeover was carried outsuccessfully. The position of Lapin Kulta beer was unaffectedand the new export products, Hartwall Upcider and AquaFennica spring water, were launched successfully.

In 2001, the company ventured into a new market byrelaunching exports to Latvia after a hiatus of several years.Lapin Kulta beer and Aqua Fennica spring water werebrought to market. Latvia is a good fit into Hartwall’s exportstrategy, which focuses on countries in the Baltic area.

E X P O R T S A N D D U T Y - F R E E

A stable year for exports

Exports to the UK, France andGermany gained strength in 2001.In the UK, the company started to co-operate with a new importer and salesin London have risen higher than ever.

The French and German marketshave also stabilised, with sales remai-ning at their previous level. In France,Lapin Kulta beer is mainly sold indaily consumer goods stores incampaign packaging that Frenchconsumers find pleasing. In Germany,the main sales channel in 2001 waspetrol stations.

The outlook for exports in 2002is good, especially in Russia and theBaltic countries. In the beer marketsof Russia and the Baltic countries, it isexpected that imported beers will alsogrow. Lapin Kulta brand-building has

been carried out systematically for many years, and sales havebegun to grow. In 2002, more investments will be made in theSt. Petersburg and Moscow areas than ever before; a LapinKulta advertising film made in Finland will be shown incinemas in these cities. In 2002, record-breaking investmentswill also be made in the promisingly evolving market ofEstonia.

Duty-free salesHartwall’s duty-free sales are focused on ship traffic on theBaltic Sea. In 2001, duty-free sales were valued at EUR 12.84million, representing growth of 6.5 per cent on the previousyear. The total sales volume in duty-free sales was 19.4 millionlitres, up 910,000 million litres on the previous year. Duty-free sales include tax-free sales in stores on board ships aswell as sales on aeroplanes and in the restaurants and bars ofpassenger ships.

The long-expected decline in the volume of duty-free saleshas not materialised. The new products introduced into theduty-free range, Legenda beer and Solina spring water, havebeen well received and have increased sales. Super FastFerries, the new Greek-German shipping company operatingon the Baltic Sea, began to sell Lapin Kulta beer in therestaurants and bars of its ships. Moreover, the decline inpassenger volumes has been slight, only about one per cent. In2001, the ships of the Baltic Sea still transported about 15million passengers.

Hartwall’s duty-free range includes all the productsfeatured in Hartwall’s regular assortment. The biggest productin duty-free sales is Lapin Kulta beer, which holds a 71 percent share of sales.

The outlook for duty-free sales remains unchanged.Although duty-free sales within the EU have ended, passengerships will continue to use routes on which duty-free sales arepermitted.

29

Hartwa-Trade, owned by Hartwall, is specialised in importing,

distributing and marketing alcoholic drinks and wines. The

company’s operations strengthen Hartwall’s strategy of

operating as a leading beverage company. Hartwa-Trade has

consolidated its position in Finland’s alcohol business.

During the review year, Hartwa-Trade’s net sales rose by 46%.

Its sales volume rose by 59%, which was to a large extent due to

an increase in wine sales.

One order, one delivery, one invoiceHartwa-Trade’s ordering and distribution systems rely on theexisting functions of its parent company, Hartwall. Bothbrewery products and other alcoholic beverages are deliveredto the customer, freight prepaid, in the same load, with asingle order and one invoice. Together, Hartwall and Hartwa-Trade comprise a unique player in the Finnish beveragemarket, thereby improving Hartwall’s customer service.

Hartwa-Trade employs 26 people, providing nationwideservice to its customers.

A product range featuring world-renowned beveragesHartwa-Trade’s product range includes about 500 product titlesfrom all the major alcohol segments. The company has close to50 principals from around the world.

Most of its principals are well-known and are part of theworld’s most respected alcohol and wine companies. Hartwa-Trade is the only Finnish co-operation partner of GuinnessUnited Distillers & Vintners (GUDV), the world’s largestalcoholic beverage company. Its key products include Smirnoffvodka, Gordon’s Gin, Johnnie Walker whiskeys and Baileysliqueur.

Hartwa-Trade’s year of growth

H A R T W A - T R A D E

Hartwa-Trade’s other major principals include the Frenchcompany C.C.G International, whose best-known brands areMeukow cognac and Napoleon Courriere brandy.

The most important wine principals are the French vintnerLes Grands Chais de France (GCF), the Spanish manufacturerof sparkling wines Freixenet and the French Lansonchampagne house. All in all, Hartwa-Trade’s product rangefeatures about 250 wines.

Operating environmentAbout 180 importers and wholesalers of alcoholic beveragesare active in Finland, along with numerous sales agencies. In2001, the aggregate market hit 74.5 million litres, of which43.0 million litres were wines, 27.3 million litres were spirits,and 4.2 million litres were "intermediate" products. Alkohandles over 80% of total sales. Hartwa-Trade’s customersinclude licensed restaurants and bars and Alko’s nationwidechain of stores.

Hartwa-Trade’s sales develop favourablyDuring the review period, Hartwa-Trade became a significantbeverage supplier in the restaurant sector. Sales to Alko alsorose, and at present Alko has 130 products imported byHartwa-Trade in its product range.

Consumption of almost all types of alcoholic beveragesincreased during the review period, with wine consumptionrising by close to a fifth compared with the previous year.Consumption of red wines rose by 18% last year and that ofwhite wines by 8%. About 55% of the products sold byHartwa-Trade are wines.

The company continued to develop its product rangevigorously. The wine selection was strengthened and thecompany’s competitive position was improved via theacquisition of all the shares outstanding in two sales agencies,Oy Lindtrade Ab and Nahedor Oy. Thanks to theseacquisitions, the company’s range now includes GeorgesDuboeuf’s Beaujolais wines and GCF’s J.P. Chenet winefamily; Chenet’s red wine is the bestselling French red wine inFinland and the world.

Outlook for the futureReorganisations in the Finnish alcohol business are continu-ing. Consequently, a few major goods suppliers are assumingcontrol of the field of business.

Wine consumption is expected to keep growing. Hartwa-Trade’s field of operations will also be affected by the State’salcohol tax policy solutions.

Hartwa-Trade will continue to develop its product range.In sales to licensed restaurants and bars, the company aims toclaim a third of the market. It wishes to be a major co-operation partner for Alko and a leading supplier in thelicensed restaurant sector. The company’s medium-termobjective is to generate 10% of Hartwall’s domestic net sales.

30

B A L T I C B E V E R A G E S H O L D I N G

31

Baltic Beverages Holding AB (BBH) is a brewery company operating in the markets of

Russia, Ukraine, Estonia, Latvia and Lithuania. BBH is owned jointly by Hartwall (50%)

and the Danish Carlsberg Breweries A/S (50%), which in turn is owned by Carlsberg A/S

and the Norwegian Orkla Group, with Carlsberg A/S owning 60% and Orkla 40%.

BBH was founded in 1991 to promote its owners’ business activities in the growingbeer markets of Eastern Europe. At the end of the report period, the company had12 breweries and five malt houses and it was the leading player in the beer marketsof Russia and the Baltic countries. In Ukraine, BBH is competing for the secondmarket place. At the end of 2001, BBH’s subsidiary, Baltika, took steps to buy theshare majority in the leading Belorussian brewery, Krinitsa. The sale, however, hadnot been finalised by the end of the report year.

BBH is registered in Sweden, but its management is dispersed in Helsinki,Stockholm, Oslo and Tallinn. The company’s managing director is Finnish ChristianRamm-Schmidt. BBH’s owners have the right to appoint an equal number ofmembers to the Board of Directors. The owners take turns to appoint the chairmanof the Board in alternate years; the chairman’s vote is not decisive if voting is tied.The members of the Board of Directors whom Hartwall appointed for 2001 wereGustav von Hertzen, Henrik Therman (Chairman of the Board) and Jussi Länsiö.Carlsberg Breweries A/S was represented by Paul Bergqvist, Finn Jebsen and NilsAndersen.

Hartwall consolidates 50% of all figures in BBH’s Balance Sheet and Profit andLoss Account in its own financial statements.

Strategy and corporate missionBBH has expanded significantly during its ten-year history. In 1991, the companyacquired its first brewery, the Estonian Saku, whose production volume was14 million litres in its first year under the ownership of BBH. In the following yearBBH bought the majority stake of Latvia’s leading brewery, Aldaris, and in 1993of the Russian brewery Baltika. Since then BBH has acquired new breweries nearlyevery year. Each acquisition is preceded by a careful selection process; the pros-pective buyees are expected to have, among other things, an optimal geographicallocation, an impeccable history of lawful business dealings as a private company andcapable local management.

B A L T I C B E V E R A G E S H O L D I N G

Yet another year of excellent growth

BBH’s ownership structure 1 Feb. 2002

Oyj Hartwall Abp Carlsberg Breweries A/S

Estonia: Saku (75%)Latvia: Aldaris (75%)Lithuania: Svyturys Utenos Alus

(43.8%),■ Svyturys■ Utenos Alus

Baltika (75%)■ Baltika-Don (63%) 1)

■ Tula (74%) 1)

Yarpivo (60%)Zolotoy Ural (75%)Pikra (61%)Vena (49.9%)Voronezh (70%)

Slavutich (81%)Lviviska Pivovarnia (99%)Slavuta Malt House (86%) 2)

1) Baltika-Don is majority ownedthrough Baltika. Tula is owned50.01% by Baltika and 35.9% byBBH.2) Slavuta is the only malthouseowned directly by BBH, the fourothers are owned by the breweries.

BALTICS RUSSIA UKRAINE

BBH AB

32

B A L T I C B E V E R A G E S H O L D I N G

BBH’s strategy is to grow by acquiring a majority stake in breweries that arelocal market leaders in the growing markets of Russia, the Ukraine and the Balticcountries, to invest technology and know-how in them, and strengthen their sales,marketing and distribution systems. The quality of the beer is being raised to aWestern standard through product development and technological improvements.All of BBH’s products are strong brands either at the regional or national level, andlarge-scale outlays are made to strengthen them even further. Management as well asoperational decision-making remain in the hands of the locals, while BBH makesstrategic decisions and offers its support in such areas as sales and marketing as wellas the development of production and personnel. BBH seeks to strengthen itsposition as a leading player in the Eastern European markets. In spite of BBH’sinternational ownership, its different breweries are perceived as local players.

A central feature of BBH’s strategy is the joint ownership of breweries with theirlocal personnel. BBH aims to own approximately 75% of each of its breweries inorder to make sure that it has the necessary authority to make decisions. Not onlyupper management but also members of personnel can own a part of the breweryin which they work. This increases their commitment towards the company. Localinvestors, too, may own shares in the breweries. BBH has an important role in the

BBH’s aggregate sales volume

2,500

2,000

1,500

1,000

500

0

million litres

Russia

Ukraine

Baltics

91

14

92

50

93

99

94

160

95

201

96

458

97

616

98

925

99

1,278

00

1,829

01

2,383

BBH in a nutshell 2001

Country Brewery Aquired BBH Consolidated Growth Market- Personnelownership sales % shares 31 Dec. 2001

31 Dec. 2001 volume, 2001million litres %

Russia Baltika 1993 75% 1,404 32 22% 5,503Yarpivo 1996 60% 354 40 6% 954Tula Brewing 1) 1997 74% - - - -Baltika-Don 1) 1997 83% - - - -Zolotoy Ural 1999 75% 72 13 1% 527Pikra 1999 61% 77 51 1% 653

Ukraine Slavutich 1996 82% 208 20 14% 709Lvivska 1998 99% 51 119 4% 261

Estonia Saku 1991 75% 55 6 49% 268

Latvia Aldaris 1992 75% 76 15 45% 464Lithuania Svyturys 2001

Utenos Alus 1997 44% 108 16 45% 673Internal sales -22

Total 2,384

1) Baltika’s subsidiary. Its sales figures and personnel are included in Baltika’s figures.

33

B A L T I C B E V E R A G E S H O L D I N G

communities in which it operates. It is, after all, one of the biggest tax payers inthe area as well as an employer that contributes to the training and well-being of itsemployees. Local presence is the cornerstone of BBH’s strategy as the company aimsto meet the needs of the consumers more effectively. A local corporate image alsohelps to avoid the obstacles that foreign companies so often meet in these markets.

A large part of the earnings of the BBH breweries are used on their furtherdevelopment and augmentation is financed mainly from their own cash flow.

The Group in 20012001 was a year of excellent growth for BBH. The trend in the beer industry and theeconomy in general was favourable. Other factors contributing to the earnings werethe large increases in production capacity and sales volumes. Also, emphasis onefficiency in the organisation in general, as well as in distribution and marketing,had a positive effect on the earnings. The co-operation between different BBHbreweries in areas such as distribution and production enabled several factories totake part in the manufacture and delivery of different beer brands, thus making theseprocesses more flexible. The sales volume of the company rose by 30% to 2,383.5million litres (1,828.7 million litres in 2000). The consolidated net sales (100%)were SEK 9,081.3 million or EUR 978.4 million (SEK 5,397.4 million in 2000) andthe operating profit (100%) was SEK 2,583.1 million or EUR 278.3 million (SEK1,326.9 million in 2000). Net sales increased by 68% and the operating profit by78% on the previous year. This was achieved without any acquisitions.

Strong investments continued and they amounted to SEK 2,330 million (100%)in the report year (EUR 251 million). The focus was mainly on increasingproduction capacity, boosting the distribution system and making the company morevisible in the market. In 2001 the company had an average of 10,090 employees.

At the end of the report period, BBH had six breweries in Russia, two in Ukraineand four in the Baltic countries. On 27 December 2001, the leading Lithuanianbrewery, Svyturys, in which Carlsberg had a majority stake, was integrated intoUtenos Alus, a BBH brewery. The new brewery was named Svyturys-Utenos-Alus.On 1 January 2002, BBH bought a 49.9% stake in Vena brewery operating inSt. Petersburg from Carlsberg. BBH has management responsibility in the brewery

Beer consumption per capita, trend per country, litres

1990 1994 1997 1998 1999 2000 2001

Estonia 47 33 41 47 61 61 67Latvia 31 24 29 31 39 37 41Lithuania 55 31 41 47 54 61 66Russia 23 16 19 23 30 35 41Ukraine 28 17 11 13 16 21 25

Beer markets 2001

2000 2001 Market BBH’s growth BBH’s BBH’sgrowth market share in market share in

2000 2001

Estonia 88 92 4% 6% 47.7% 49.0%Latvia 96 101 6% 1% 46.7% 45.0%Lithuania 228 231 5% 2% 37.2% 45.0%Ukraine 1,020 1,200 16% 29% 16.9% 18.0%Russia 5,225 6,146 18% 31% 25.2% 29.8%

Source: BBH, local brewers’ associations in Baltic countries and Ukraine, State Statistic Committee in Russia, Goskomstat

34

B A L T I C B E V E R A G E S H O L D I N G

as well as a call option, to buy the remaining 49.9% share, which is valid from 2003.In January 2002, BBH bought the Voronezh brewery and started construction workon a new brewery in Samara. Steps were also taken to join Baltika-Don and TulaBrewing, the two breweries operating under Baltika brewery, to Baltika.

In November, Baltika announced its plan to acquire a 50% stake as well as onevote in the Belorussian brewery Krinitsa provided that the Annual General Meetingwere to allow it. However, the deal had not been closed by the end of the year andnegotiations continue in 2002. Several new acquisitions which were performed in thebeginning of 2002 were the result of numerous negotiations that took place in 2001.

In spring 2001, BBH announced that it was going to sell the Kalnapilis breweryin Lithuania. The reason for this was the dominant market position acquired by BBHand Carlsberg’s Svyturys brewery with the formation of Carlsberg Breweries A/S. TheLithuanian competition authorities stipulated that one of the breweries must be sold.Consequently, Kalnapis was sold to the Danish Bryggeriegruppen in October 2001.

Malt housesIn order to ensure the availability of its most important raw material, malt, BBHhas invested in its own malt house capacity to make the company less dependenton imported malt. BBH owns shares in five malt houses, of which three are locatedin Russia, one in Lithuania and one in Ukraine. The total capacity of the malt housesis approximately 236,000 tonnes per year which is enough to cover about half of theraw material needs of the company. In Ukraine, BBH engages in contractual farmingin order to ensure the availability of barley.

BBH’s malt houses

Country Malt house Owner Capacity,tonnes/year

Lithuania Litmalt Lahden Polttimo 50% / Utenos Alus 50% 10,000Russia Yarpivo Yarpivo 15,000

Baltika Soufflet 70% / Baltika 30% 105,000Zolotoy Ural Zolotoy Ural 16,000

Ukraine Slavuta Malt House BBH 86% 90,000

Total 236,000 tonnes/year

35

B A L T I C B E V E R A G E S H O L D I N G

Distribution strategyThe company continued to invest in its own distribution network in 2001. In orderto meet the expectations of their own regions, each country in which BBH operateshas its own distribution strategy. Strong outlays on distribution will continue in allareas, an efficient and extensive distribution system being one of BBH’s strengths.The objective is to control the distribution chain all the way to the points of sale.

Both Russia and Ukraine have extensive distribution networks with their ownsales and distribution terminals. In Russia, there are a total of 30 distributionterminals, of which 20 were established by the Baltika Group. Efficient distributionensures the availability of Baltika beer throughout the country and also makes itpossible to maintain the price level of beer in line with the brand’s position in theentire country. In Ukraine, BBH has a total of seven distribution terminals.

The spread of retail chains is most advanced in the Baltic countries which alsohave the best developed distribution channels. The main part of the beer volume isdistributed directly to the retail trade. In Russia and Ukraine, the structures of theretail sectors are still highly diverse, but some signs of consolidation are alreadyvisible, mainly in metropolitan areas.

Personnel developmentAs so much of BBH’s business operations remain in the hands of local managementand personnel, the development of personnel has an important part to play.2001 saw the implementation of several practical seminars and training programmesfor personnel as well as a long-range leadership module programme for uppermanagement. BBH has also supported the breweries in such areas as recruitment,career planning and personnel management.

St. Petersburg

Voronezh

Chelyabinsk

Krasnojarsk

Moscow

Samara

Yaroslavl

KhabarovskRostov-on-Don

Tula

Brewery

Distribution center

Murmansk

Smolensk

Vologda

N.Novgorod

Krasnodar

Pyatigorsk

Astrakhan

SaratovUfa

Perm

Ekaterinburg

Omsk

NovosibirskUlan-Ude

Arkhangelsk

Stavropol

Sochi

Irkutsk

The distribution centers of BBH in Russia

36

B A L T I C B E V E R A G E S H O L D I N G

37

B A L T I C B E V E R A G E S H O L D I N G

RUSSIABBH is clearly the market leader in Russia, Baltika being the only nationwide beerbrand in the country. The company has eight breweries in Russia: Yarpivo, ZolotoyUral and Pikra, Baltika-Don and Tula Brewing (which both operate under Baltika inSt. Petersburg), as well as Vena and Voronezh which were acquired at the beginningof 2002. These breweries are located so that they easily reach the beer marketsof the larger cities and population centres. BBH strengthened its position furtherin 2001 as its share of the aggregate market (volume) went up to 30% (27%),this was achieved without the new breweries of Vena and Voronezh. In Russia,BBH concentrates in the manufacture and sale of quality, medium-priced beer, theso-called mainstream segment, in which it has a market share of 46%. The Russianmarket accounts for 80% of BBH’s total volume, and 79% of net sales.

BBH’s sales volume in Russia is two and a half times that of the second largestplayer in the market, Sun Interbrew. In Russia, the total production volume of BBHbreweries grew by 34% on the previous year, from 1,427 million litres to 1,907million litres. Competition tightened as both national and international participantsconsolidated their positions by means of vigorous marketing efforts. At the sametime the small, local breweries focusing in the weaker-quality, low-cost beer segmentlost market shares.

BBH’s earnings trend has been excellent in Russia. Underlying the increases in theprice level and the improvement in the margins were the increased benefits of scale.

The consolidation of the company structure continued in 2001. In order toincrease operational control and to avoid overlapping functions, the Baltika-Donand Tula breweries were intergrated into the Baltika Group. Baltika was listed onthe Moscow Exchange. BBH and the local management of the brewery remain thebiggest owners of Baltika.

The intergration of Vena into BBH that took place at the beginning of 2002 alsobrought new brands to the BBH product family: the international brand Tuborg andthe more local Nevskoye, which is positioned in the high-quality local beer segment.The Vena brands are a welcome addition to BBH’s product selection in Russia, andgive the company fast access to the segment in which it has previously had a fairlymodest position: the local premium beer segment. Vena’s market share (value) isapproximately 13% in the St. Petersburg area and 6% in the Moscow area. Vena iscurrently implementing an investment programme which will double its productioncapacity by summer 2002.

BBH continues to invest in its distribution network as well as its productioncapacity and marketing efforts in Russia. BBH’s aim is to continue to grow andto strengthen its position as the market leader.

Market positions in Russia

Market share by volume 2001 2000 Change, % pts.

BBH 29.8 26.7 +3.1Sun Interbrew 12.7 14.7 -2.0Ochakova 8.1 7.4 +0.7Krasny Vostok 6.8 4.9 +1.9Bravo 3.8 2.7 +1.1St. Razin 2.7 2.9 -0.2Efes 2.4 2.4 -SAB 1.8 1.8 -Vena 1.6 1.0 +0.6Other 30.3 35.5 -5.2

100% 100%

Source: BBH, State Statistic Committee, Goskomstat (preliminary data)

Development of BBH's sales volume

in Russia, consolidated

Baltika Group Yarpivo

2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

0100999897

437

704

970

1,434

1,907.2

million litres

Zolotoy Ural Pikra

38

B A L T I C B E V E R A G E S H O L D I N G

BaltikaThe Baltika brewery in St. Petersburg joined BBH Group in 1993. Thanks to itsinvestment programmes in recent years, the sales volumes have risen to 950 millionlitres and the brewery is now the biggest production unit in Europe.

Also Baltika-Don in Rostov and Tula Brewing in Tula, south of Moscow, areoperating under the administration of Baltika brewery. In the report period, the totalsales volume of the Baltika Group increased by 32% up to 1,404 million litres whichequals 59% of the group’s total production. Baltika Group strengthened its positionas the market leader as its market share rose from 20.1% to 22.1% which can beconsidered a firm position. Resulting from several successful sales and marketingefforts, exports increased significantly, and constituting 2.8 % of total sales at theend of the year. Exports were directed mainly to the are of the former Soviet Union(the CIS countries) as well as the United States, Israel, Germany and other Europeancountries.

Baltika is the only truly nationwide beer in Russia. It is manufactured in all threeBBH breweries in the country and sold throughout the nation. Selling over800 million litres in 2001, it is one of the biggest beer brands in Europe. Withregard to its price, Baltika is positioned in the upper mainstream segment, andexpanding it into other segments has also been considered. Baltika ranks first in thegrowing canned beer segment with its market share of over 60%, and it is also themarket leader in the non-alcoholic beer market. In 2001, rapid growth in sales madeadditional investments to production lines necessary. The share of beer sold indisposable plastic bottles (PET) rose to 28.5%. The brands sold in plastic bottlescomprise the honey-flavoured Medovoe beer and the Arsenalnoye brand. Baltika isnot sold in PET bottles but in recyclable and reusable glass bottles and cans as wellas in containers suitable for restaurant use.

Arsenalnoye, a beer manufactured by Tula in the Baltika Group, doubled itssales and is currently BBH’s second best selling beer brand. Newcomers were alsointroduced to consumers in 2001 with the launch of the new non-alcoholic Balticno 0 and Baltic no 8 wheat beers. The sales started well and consumers have clearlyfound these new products.

Tightened competition and growing demand called for sizeable investments inBaltika’s distribution network and production. At the end of 2001, Baltika Grouphad 20 distribution terminals, and 12 more are planned for 2002. In addition to adistribution network, Baltika also has its own sales organisation. Improved efficiencyin the production and distribution systems enabled rapid growth in sales.Investments in sales and marketing will also be increased in the future, and themarketing budget for the brand building of Baltika’s brands will be doubled in 2002.

YarpivoThe Yarpivo Brewery, located in Yaroslavl, north of Moscow, is the second largestBBH brewery in Russia. Its sales volume grew by 40% up to 354 million litres,about 15% of the consolidated sales. Yarpivo’s market share was 5.7% in 2001(4.8%) and it is currently competing for third place in the Russian beer markets.The brewery’s namesake, the Yarpivo beer, is sold nearly throughout the nation,and has a very secure position in the market. Also the sales of the Volga brand,a beer sold in plastic bottles, increased significantly.

Outlays on capacity continued during the year under review, bringing thecapacity to its present level of 400 million litres. The new canning line wascompleted at the end of 2001, enabling Yarpivo to react quickly to the growthin the canned beer segment.

39

B A L T I C B E V E R A G E S H O L D I N G

Zolotoy UralThe technical modernisation programme which was started two years ago wascontinued according to plan, and production was brought to a Western standard.The sales volume rose by 13% and profitability remained at a high level. The salesand distribution organisations were developed further, and the brewery changed itsname from Chelyabinskpivo to Zolotoy Ural, The Gold of the Urals. Operating inthe Ural region, Zolotoy Ural seeks to be associated strongly with the 20 millionpeople living in the Ural region.

The two largest beer brands of the brewery are Chelyabinskoye and ZolotoyUral. The latter brand is being marketed vigorously in order to make it the marketleader of the area. The brewery’s market share is 2.8% at the moment and it isgrowing rapidly.

PikraBBH’s farthest brewery, the Pikra brewery in Krasnoyarsk, southern Siberia, is one ofthe newest members of the BBH Group. The first stage of a technical reconstructionof the brewery was completed as planned in summer 2001. The reconstructionenabled the brewing of high-quality beer. A new high-quality beer, SibirskayaLegenda, was launched as early as June 2001. Sales commenced well and the brand isgrowing according to expectations. Thanks to new product launches and developmentof production, sales increased by 51% on the previous year, amounting to a total of77 million litres. Sales of beer grew by 74% but the sales of soft drinks fell.

The brewery’s current market share is 0.8% and the trend is upwards. Pikrahas an important part to play in BBH’s strategy when the company is competingfor market leadership in Siberia. The next stage of the investment programme isscheduled to be completed in May 2002 and it will increase capacity significantly.At the same time, the brewery can also start producing beer that is sold in plastic(PET) bottles.

BBH’s share in Pikra rose from 50% to 61% during the report period.

UKRAINEBBH further strengthened its position in the Ukraine, and the company is nowaiming at the second market position in the country. In spite of tighter competi-tion, BBH increased its market share by one percentage point to 18%. Themarket leader of the area, Sun Interbrew, more or less retained its position, andObolon, a company under Ukrainian ownership and BBH’s main competitor forthe second position in the market, lost some ground. The competition in theUkrainian market tightens as the newest challenger, the Donetsk Group, hasincreased its market share rapidly through acquisitions.

The volume of the Ukrainian BBH breweries rose by 32% on the previousyear and amounted to 259 million litres, of which 221 million litres were beer and38 million litres soft drinks. In the Ukraine, BBH is well represented in all beersegments and has the strongest standing in the premium and mainstream segments.The share of the sales in Ukraine accounted for 11% of the consolidated sales.

In addition to beer brands, the company also sells and manufactures the brandsof PepsiCo Inc. The co-operation which started in 2000 has developed favourablyand the sales of Pepsi products have risen by 55% on the previous year.

BBH has two breweries in Ukraine: Slavutich in the east and Lvivska Pivovarniain the west. The consolidation of the corporate structure continues, but the unifiedorganisation created in 2000 has already enabled a more efficient coordination offunctions, thus creating synergy benefits. As both breweries manufacture the same

40

B A L T I C B E V E R A G E S H O L D I N G

brands they have been able to even out production peaks. Also the benefits achievedin logistics have been significant.

BBH is currently modernising the old, Russian-style beer bottle to meet thedemands of the consumers as well as to establish a bottle return system based onthe European model. Succeeding to do so, BBH will gain strong know-how in theglass bottle segment. Thanks to BBH’s own network of contract cultivation and itsbreweries’ malt houses, the availability of raw materials has also improved. Havinga nationwide distribution network of its own makes BBH a force to be reckonedwith. It also guarantees that the breweries are able to distribute their productsthroughout the country.

During the report year, BBH placed significant emphasis on marketing, brandbuilding, product launches and promotional campaigns. The company seeks toincrease its market share and to reach the second market position in the Ukraine.

SlavutichThe volume of the Slavutich brewery increased by 20% to 208 million litres,rendering it a market share of 14%. Thanks to its nationwide distribution network,the Slavutich brand has become well-known and widely distributed. It can truly beconsidered the country’s leading nationwide beer.

The bottling line for plastic bottles installed in 2000 proved to be a lucrativeinvestment. Two new beers that were developed for the growing plastic bottlesegment, Khmilne Light and Khmilne Strong, reached a leading market position.The PET bottling line was also used for Pepsi products.

The Slavutich beer won the Beer of the Year Contest, a competition in whichseveral international beer brands also took part. One of the criteria, for instance,was the positive development of the brand and the sales. Steps were also taken togain a better market position in Kiev by means of a development programme.Slavutich also made a licence agreement with Carlsberg and started the productionof Tuborg beer in January 2002.

Lvivska PivovarniaThe technical modernisation of the Lvivska Pivovarnia brewery, founded in 1715,was completed before summer 2001, after which a new product family, Lvivske,was successfully launched in May 2001. The production volume of the breweryamounted to 51 million litres which is 119% higher than in the previous year.The brewery has a 4.2% share of the Ukrainian market.

Marketing efforts to create a strong local image for Lvivske have been increased.

Market positions in the Ukraine

Market share by volume 2001 2000 Change, % pts.

Sun Interbrew 31.2 30.9 +0.3Obolon 22.0 26.6 -4.6BBH 18.0 17.0 +1.0Donetsk 9.4 8.5 +0.9Other 19.4 17.0 +2.4

100% 100%

Source: Local brewers’ association (preliminary data)

Development of BBH's sales volume

in the Ukraine, consolidated

Slavutich Lvivska Pivovarnia

300

250

200

150

100

50

00100999897

6578

117

196

259

million litres

41

B A L T I C B E V E R A G E S H O L D I N G

42

B A L T I C B E V E R A G E S H O L D I N G

Slavuta malt houseSlavuta malt house in the Ukraine is the only malt house owned directly by BBH,whereas the other BBH malt houses are owned by individual BBH breweries.With its 90,000 tonnes production capacity, Slavuta is the country’s biggest malthouse. Its production is sufficient to meet the raw material needs of the BBHbreweries in the Ukraine and surplus is sold to outsiders.

The greatest difficulties facing the operation have to do with the availabilityof barley of a sufficiently high quality. In 1999, the brewery engaged in contractcultivation with chosen farms. The co-operation has been satisfactory and the farmswere able to produce most of the barley needed. The rest were imported fromwestern countries. BBH considers the availability of high-quality malt one of the keysuccess factors and the essential precondition for producing beer of uniform quality.

THE BALTIC COUNTRIESBBH strengthened its position as a market leader in the Baltic countries, reaching amarket share of 45% at the end of the year. All the large breweries in these countriesare under foreign ownership, which made competition even tighter than before.At the end of 2001, the total production volume of BBH in the Baltic countries grewslightly and came to 217 million litres, of which beer accounted for 87% and softdrinks and mineral waters for 13%.

BBH has four breweries in the Baltic countries: Saku in Estonia, Aldaris inLatvia, Svyturys and Utenos Alus in Lithuania. All of them also co-operate withPepsiCo Inc whose products are manufactured in the Aldaris brewery in Riga andsold by BBH. BBH’s own Zingo brand was a success in the orange soft drinksegment. The sales volumes of Vichy Classic mineral water continued to grow andthe company also entered into sales agreements with Carlsberg, Guinness andKilkenny in the Baltic countries. The sales of cider started well in Estonia andLatvia, and they soon gained a significant market share in spite of the competitivesituation already evident in these markets.

BBH has taken an active stance in the development of the environmental taxlegislation especially in Latvia where the sales of drinks in disposable plastic bottleshave been particularly high. The company has also introduced the glass bottle returnsystem based on the Scandinavian model in these countries. Using glass bottles isalso one of BBH’s strengths as they enhance the taste of the beer and maintain itsgood quality during storage.

The company aims to retain the strong market position it has attained in theBaltic markets and to improve its market share in a sustainable and well-plannedmanner.

Saku (Estonia)A market share of 49% makes BBH the market leader in Estonia. The aggregate beermarket grew by four per cent, and BBH increased its market share by one percentagepoint on the previous year. The Saku brewery’s volume amounted to 48 millionlitres, of which beer claimed 87% and mineral waters and soft drinks the remaining13%. After the standstill in the trend of beer consumption in the previous year, thesales figures of beer have begun to show signs of improvement. Due to tightenedcompetition, more outlays have been made on sales and marketing.

Development of BBH’s sales volume

in the Baltic countries, consolidated

Estonia Latvia

250

200

150

100

50

0

0100999897

million litres

Lithuania

32

47

37

116

41

44

46

131

52

53

85

190

50

56

93

199

48

61

108

217

43

B A L T I C B E V E R A G E S H O L D I N G

Saku is the best known brand and the most popular beer in the Estonian market.A new, lighter version of Saku joined the product family, thus offering the consumersa lighter and milder option. A new strong beer named Sorts was launched to replacethe old Sarvik beer. The sales of Guinness, Kilkenny and Carlsberg, which startedin 2000, had a promising start, although the premium market segment is still small.

The Kiss cider, which is being sold in all Baltic countries, claimed a goodposition soon after it was launched.

Aldaris (Latvia)The Aldaris brewery has a 45% market share in Latvia with a sales volume of61 million litres of which beer accounted for 49 million litres and soft drinks andmineral waters for 12 million litres.

Aldaris is especially strong in the quality segment, that is beer sold in glassbottles, in which it has a significant market share of about 70%. Special attentionis paid to maintaining the high-quality image of the beer.

In 2001, the brewery launched three new products in the one-litre plastic bottlesegment, Aldaris Light, Aldaris Dark and Aldaris Strong, as well a new VanagaStrong beer which is to be sold in two-litre bottles. Vanaga Strong quickly becameone of the best-selling products of the brewery. Also, another new beer in the sameproduct group, Vanaga Light, was introduced to the consumers. Aldarisstrengthened its position in the plastic bottle segment. Its best-selling beer remainedthe market leader Aldaris Zelta.

Aldaris also added to its beer selection by starting the sale and distribution ofGuinness, Kilkenny and Carlsberg at the end of 2001.

Utenos Alus and Kalnapilis (Lithuania)Several uncleared matters complicated BBH’s position in the Lithuanian marketthroughout the report year. The sale of the Kalnapis brewery had not been finalisedyet and the company was not able to merge the Svyturys brewery, owned byCarlsberg, into the BBH Group. The uncertain situation was reflected also in thethree breweries and their joint marketing organisation, JAC (Jungtinis AlausCentras), as well as in the market share figures which were on a gradual decline.After these matters were finally solved at the end of 2001, BBH was once again freeto focus on the development of its business operations and market share in Lithua-nia.

BBH has two breweries in Lithuania, Svyturys and Utenos Alus, and a marketshare of 45%. The total volume of the breweries is 108 million litres.

BBH’s new corporate structure will further strengthen its position in theLithuanian market. The Svyturys brewery is the market leader of the area with itshigh-quality image and its strong position in the restaurant segment. The secondlargest brewery in the market, Utenos Alus, adds to BBH’s product selection in asuccessful way.

Market positions in Estonia

Market share by volume 2001 2000 Change, % pts.

BBH 49 48 +1Tartu 34 31 +3Viru 7 9 -2Pärnu 3 3 -V-Nigula 2 2 -Other 1 1 -Import 4 6 -2

100% 100%

Source: Local brewers’ association

44

B A L T I C B E V E R A G E S H O L D I N G

45

Market positions in Latvia

Market share by volume 2001 2000 Change, % pts.

BBH 45 47 -2Alus Avots 8 11 -3Liepaja 6 2 +4Latgale 6 7 -1Varpa 6 9 -3Riga 5 6 -1Bauska 5 5 -Cesis 4 3 +1Lacplesis 4 3 +1Other 6 4 +2Import 5 3 +1

100% 100%

Source: Local brewers’ association

B A L T I C B E V E R A G E S H O L D I N G

Market positions in Lithuania

Market share by volume 2001 2000 Change, % pts.

Svyturys 28 26 +2Utenos Alus 17 20 -3BBH total 45Kalnapilis 16 18 -2Vilniaus Tauras 12 11 +1Ragutis 7 7 -Gubenija 8 4 +4Other 10 11 -1Import 2 3 -1

100% 100%

Source: Local brewers’ association

Outlook for the futureIn the eastern European markets, the consumers’ consumption habits are becomingmore western, and their purchasing power is increasing. Except for the Balticcountries, consumption is still at a fairly low level. The economic and politicalsituation in the area has stabilised significantly, and the current trend is expectedto continue. Brand loyalty remains low in the area, but BBH has the advantage ofhaving been the first to enter the market.

BBH is operating in all segments but one, namely the low-cost - and low-quality-segment. It targets especially young, urban consumers. BBH’s own extensiveproduction and distribution networks give the company a competitive edge.The strategy of dynamic growth continues and it is financed mainly through thecompany’s own cash flow. In the future, the company will continue to focus onmarketing, sales and distribution as well as making full use of the synergy benefitsmade possible by the co-operation between the breweries.

4646

47

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Financial statement, summary

The financial result in brief■ Net sales EUR 807.6 million (612.0)■ Operating profit EUR 162.5 million (102.8)■ Profit before extraordinary items and taxes EUR 151.0 million (94.9)■ Earnings per share EUR 1.40 (0.80)■ Proposed dividends: Series A Share, EUR 1.11 (0.20), Series K Share, EUR 1.10 (0.19)

Hartwall Group■ The Group continued to operate in line with its strategy

• consolidate the position as Finland’s leading beverage company• expansion and growth in the Baltics, Russia, and the Ukraine

■ Hartwall remained Finland’s biggest brewing and soft drinks company (market share 45.1%)• aggregate sales by the brewing industry rose 1.7% to 833,4 million litres• volume growth in all product groups except beer• Hartwa-Trade’s net sales up with 46%

■ BBH’s volume (100%) grew with 30% to 2,383.5 million litres• volume growth (organic) in Russia 33%, Ukraine 32%, Baltic states 9%• BBH was market leader in all markets except the Ukraine where the company

ranks number three• Lithuanian Kalnapilis was sold in October, Utenos Alus and Svyturys merged

at the turn of the year

■ investments were EUR 248.6 million (Finland EUR 123.1 million, BBH EUR 125.5 million).

Outlook for 2002■ It is expected that the Group’s net sales and operating profit will grow

■ in Finland• no significant market growth is anticipated in beer and cider• the market for mineral waters and soft drinks is forecast to grow slightly• Hartwall’s aggregate sales in Finland are expected to grow in step with market growth,

with net sales growing at a slightly faster rate

■ market growth in Russia and the Ukraine is anticipated to remain strong albeit slowerthan in the report year

• BBH’s objective is to consolidate its market position, at which point its sales volumewill most likely exceed market growth

• it has been assessed that prices can be raised in accordance with inflation

■ investments will still remain at a high level• increasing net debt and financial expenses• the company has decided to float a bond loan in the spring to strengthen

its financial position

■ The above estimates are based on the assumption that no significant changes will take placein the main currencies of BBH’s territories.

EUR million 2001 2000 Change

Consolidated net sales 807.6 612.0 +32.0%

Consolidated operating profit 162.5 102.8 +58.1%

% of net sales 20.1% 16.8% +3.6 % pts

Group’s aggregate sales volume, million litres 1,605.7 1,319.0 +21.7%

(incl. BBH 50% )

FI

NA

NC

IA

L

ST

AT

EM

EN

TS

2

00

1

48

B O A R D O F D I R E C T O R S ’ R E P O R T O F O P E R A T I O N S I N 2 0 0 1

SummaryThe Hartwall Group’s long-term and goal-directed implementation of its strategy generatedrecord-breaking earnings in the report year. The business environment was characterised bythe rapid weakening of global economic growth. In spite of this, economic growth remainedfavourable in part of the Hartwall Group’s business territories, laying a stable foundation forbusiness operations.

During the report year, the Hartwall Group’s operating profit grew by 58% to EUR162.5 million (102.8), while the share of net sales representing operating profit rose to20.1% (16.8%). Exclusive of non-recurring items, the Hartwall Group racked up the bestoperating profit in its history, both in euro and relative terms. One of the factors underlyingthe improvement of profitability was that net sales growth remained at a high level, 32%,with net sales ascending to EUR 807.6 million (612.0).

Net profit increased by 81% to EUR 93.0 million (51.5), partially due to the fact that,in relative terms, taxes remained lower than in the previous year. Earnings per share grewfrom EUR 0.80 to EUR 1.40, up 74% on the previous year.

Investments rose significantly, climbing to EUR 248.6 million (162.6). Of this amount,half were made in Finland, where the production and logistics centralisation investment inLahti has progressed according to plans. In the case of Baltic Beverages Holding AB (BBH),investments focused on raising the production and distribution capacity.

Although investments were riding high, the equity ratio strengthened to 58% (55%),while the gearing ratio rose moderately to 34% (27%).

The Board of Directors will propose that the dividends to be paid for 2001 be EUR 1.11on the Series A Share and EUR 1.10 on the Series K Share. The proposed dividendsrepresent 78.9% of earnings for the financial year.

During the last quarter, a significant change took place in the Group’s ownershipstructure, when the Norwegian company Orkla sold its 21.2% holding in Hartwall. Conse-quently, the proportion of shares in free float rose from 32% to 56%, increasing shareturnover substantially. At the same time, the number of foreign investors also grew.It is expected that the Hartwall Group’s net sales and operating profit will grow in 2002, too,in spite of the uncertainty holding sway in the general economic outlook. No significantmarket growth is anticipated in the beer and cider product groups in Finland. On the otherhand, the market for mineral waters and soft drinks is forecast to grow slightly. Hartwall’saggregate sales in Finland are expected to grow in step with market growth, with net salesgrowing at a slightly faster rate.

Market growth is anticipated to remain strong in BBH’s market areas, particularly Russiaand Ukraine, albeit slower than in the report year. BBH’s objective is to consolidate itsmarket position, at which point its sales volume will most likely exceed market growth.It has been assessed that prices can be raised in accordance with inflation.

Investments will still remain at a high level in 2002, increasing net debt and financialexpenses. The company has decided to float a bond loan in the spring to strengthen itsfinancial position.

The above estimates are based on the assumption that no significant changes will takeplace in the main currencies of BBH’s territories.

The consolidated financial statements include half of BBH’s income statement, balancesheet and cash flow corresponding to the Group’s 50% holding.

Hartwall’s strong growth and earnings continued

Net sales

BBH (50%) Hartwall

900

800

700

600

500

400

300

200

100

0

0100999897

445.3 486.7 468.0

612.0

807.6

EUR million

289.

415

5.9

283.

120

3.6

276.

419

1.6

293.

531

8.5

318.

448

9.2

49

B O A R D O F D I R E C T O R S ’ R E P O R T O F O P E R A T I O N S I N 2 0 0 1

Business environment stable, aggregate market growingGlobal economic trends weakened rapidly during the report year, but this did not affect theHartwall Group’s business viability; rather, economic growth in its largest market areasremained favourable. The growth in the Russian GNP is estimated to amount to 5%. Inflationhas fallen below 20% and the exchange rate of the Russian rouble against the US dollar hasremained quite stable. Political developments in Russia have also been positive.

No significant changes took place in alcohol taxation during the report year. Taxesremained unaltered in Finland. In Russia, the beer tax was raised from RUB 0.90 per litreto RUB 1.00, while vodka taxation was increased substantially more.

The Finnish aggregate market grew by slightly under 2% in 2001, with last-quartergrowth exceeding this figure slightly. In spite of the excellent weather in the July-Augustperiod, the growth figure for the full year is burdened by weak trends in the first half of theyear. In Russia, the aggregate beer market grew by 18%, with per-capita consumption risingto 41 litres. In the fourth quarter, growth slowed down to 12%. In Ukraine, market growthclimbed to 16% per capita, with consumption rising to 25 litres of beer. In the October-December period, the market was at the same level as in the corresponding period of theprevious year. Average market growth in the Baltic countries was reported to be 5% perperson, with statistical beer consumption amounting to 57 litres.

Net sales rise by 32%During the report year, the Hartwall Group’s net sales grew by 32% to EUR 807.6 million(612.0). Last-quarter net sales amounted to EUR 190.4 million (152.2) and were 25%higher than a year earlier.

Breakdown of net sales, EUR million

2001 2000 Change, %

Hartwall 318.4 293.5 8:5

BBH (50%) 489.2 318.5 53.6

Total 807.6 612.0 32.0

In the January-December period, Hartwall’s net sales in Finland grew by 8.5% comparedwith the figure a year earlier to EUR 318.4 million (293.5). The company’s sales volume wasup 4% and the average price was 4.3% higher than in the previous year due to the pricehikes carried out during the first half of the year. Hartwa-Trade’s net sales grew by 46%,increasing domestic net sales by slightly under 2% while its share of domestic sales rose to5.2% (3.9%). In the October-December period, net sales in Finland increased by 8.9% toEUR 78.4 million (71.9). Volume growth amounted to 2%, whereas the average price levelincreased by 6.8%, which was in part the result of the price hikes made at the beginning ofNovember. Hartwa-Trade’s share of net sales during the period was 7.7%.

BBH’s net sales (50%) also continued to grow vigorously during the report year, increa-sing to EUR 489.2 million (318.5), up 54% on the corresponding period of the previousyear. The sales volume rose by 30% and BBH surpassed the growth figures for the brewingindustry in all its market areas by a good margin. Its breweries in Russia and Ukraineoperated at full capacity during the peak season, the period from July to August, and not allof the demand could be satisfied. The average price per litre grew by 18%, which was due

Operating profit

BBH (50%) Hartwall

180

160

140

120

100

80

60

40

20

0

0100999897

95.5 94.3

76.6

102.8

162.5

EUR million

42.1

53.4

34.1

60.2

27.0

49.6

24.5

78.3

23.4

139.

1

50

B O A R D O F D I R E C T O R S ’ R E P O R T O F O P E R A T I O N S I N 2 0 0 1

not only to the raising of prices denominated in local currencies but also to changes in thestructure of sales and exchange rate differences arising from consolidation. The weakeningof the euro increased net sales by about 7%. In Russia, net sales were up 77%, representing79% of BBH’s total net sales. In Ukraine, net sales grew by 82%, with its share rising to11%. Aggregate net sales in the Baltic countries were 19% higher than a year earlier,representing 9% of BBH’s net sales.

During the last quarter, growth in BBH’s net sales slowed down, as expected. Net salesrose by 40% and were EUR 112.0 million (80.3). The sales volume increased by 30%.In Russia, volume growth remained at its strong level of 34%. In Ukraine it rose to 18%,while the aggregate market remained at the previous year’s level. Volume growth in theBaltic countries was reported to be 10%. The sale of the Kalnapilis brewery in Octoberand the fact that BBH assumed responsibility for the sale of the Svyturys brewery contribut-ed to this trend. In the October-December period, the euro strengthened by about 9%compared with the corresponding period of the previous year, and thus the average increasein the price level was only 7% in euro terms.

Operating profit up 58%, rising to over 20% of net salesIn the January-December period, the Hartwall Group’s operating profit increased toEUR 162.5 million (102.8), 58% higher than a year earlier. The operating profit containson one hand non-recurring expenses allocated to domestic operations and on the other handon one time income posted by BBH and their net effect at the Group level is to burdenearnings slightly. The share of net sales representing operating profit rose from last year’sfigure of 16.8% to 20.1%. The operating profit racked up by the company in the report year,exclusive of non-recurring items, was the best in its history, both in euro and relative terms,with the calculated operating profit margin rising to over 20% for the first time. Underlyingthe good earnings trend were the benefits of scale imparted by volume growth, price hikesand the more profitable structure of sales. Profitability exclusive of non-recurring itemsimproved significantly both in Finland and in BBH’s territories.

During the last quarter of the report year, operating profit came in at EUR 27.6 million(17.8), up 55% on the corresponding period of the previous year. The operating profitmargin in turn rose to 14.5% from last year’s figure of 11.6%. The non-recurring itemsaffecting full-year earnings were recorded in the last quarter and their net effect burdens theoperating profit margin by 0.6 percentage points. The operating profit of the company’sFinnish functions before non-recurring items was at the previous year’s level, but the rateof growth in BBH’s operating profit continued to gain speed during the last quarter as well.

Breakdown of operating profit, EUR million

2001 2000 Change, %

Hartwall 23.4 24.5 -4.5

BBH (50%) 139.1 78.3 77.7

Total 162.5 102.8 58.1

Rolling 12 month operating profit

180

160

140

120

100

80

60

40

20

0

Q1/01Q4/00Q3/00Q2/00Q1/00

EUR million

Q2/01 Q3/01 Q4/01

25

57

28

66

26

73

25

78

27

86

29

96

3324

139

25

20

15

10

5

0

16.7 17.4 1.,2 16.8 17.6 18.1

120

18.1 20.1

BBH (50%)Hartwall EBIT margin, %

Profit before extraordinaryitems and taxes

160

140

120

100

80

60

40

20

0

0100999897

94.5

80.7 73.1

94.9

151.0

EUR million

51

B O A R D O F D I R E C T O R S ’ R E P O R T O F O P E R A T I O N S I N 2 0 0 1

In Finland, operating profit after non-recurring items was EUR 23.4 million in theJanuary-December period, slightly under last year’s figure (24.5), with the operating profitmargin amounting to 7.3% (8.3%). Cost provisions totalling EUR 8.9 million related to theLahti centralisation project were recorded in the last quarter. The provisions include thewrite-down of the current brewery in Lahti, the accelerated depreciation of the Konala high-rise warehouse over three years and provision for unemployment insurance liability. Operat-ing profit before cost provisions thus rose to EUR 32.3 million, or 10.1% of net sales. Thesame factors that increased net sales affected the improvement of operational profitability.

Although net sales growth in Finland during the last quarter exceeded average growthfor the entire year, operating profit before cost provisions remained on the same level as inthe corresponding period of the previous year, amounting to EUR 3.3 million (3.5). Thereasons behind this trend were that sales and marketing expenses focused more on the latterpart of the year than in the previous year as well as the transitional costs incurred from thepartial start-up of production operations at the new factory in Lahti, where cost savings willstart to accumulate only in 2003. The non-recurring items recorded in the last quarterpushed the reported operating result EUR 5.7 million into the red.

Operating profit reported for BBH in the report year (50%) rose by 78% to EUR 139.1million (78.3), including capital gains of EUR 7.7 million on the sale of the Kalnapilisbrewery. Exclusive of the capital gains, operating profit grew by 68%, with its share of netsales increasing by 2.3 percentage points to 26.9% (24.6%). Profitability was improved bythe benefits of scale that growth imparted in production and distribution. Exchange ratedifferences had no significant effect on operating profit.

In the October-December period, BBH’s operating result, EUR 25.7 million (14.3),increased by 80% compared with the corresponding quarter of the previous year in spiteof the strengthening of the euro. The operating profit margin rose by 5.1 percentage pointsto 22.9% (17.8%). In the October-December period, when the operating capacity was lowerthan average, strong growth also emphasised the benefits of scale in this volume-sensitivebusiness. Capital gains from the sale of the Kalnapilis brewery increase reported operatingprofit to EUR 33.3 million, or 29.7% of net sales.

The Group’s net financial expenses rose to EUR 11.5 million (7.9), representing 1.4%(1.3%) of net sales, as net debt had increased as a result of the strong investment pro-gramme. Profit before extraordinary items and taxes and after non-recurring items camein at EUR 151.0 million (94.9), 59% higher than a year earlier.

Taxes recorded for the review period amounted to EUR 25.4 million (24.6), with the taxrate calculated from pre-tax earnings declining to 16.8% from last year’s figure of 25.9%.BBH’s tax rate is lowered by the booking of capital gains from the sale of the Kalnapilisbrewery against accumulated losses in taxation, by the tax breaks the Baltika Group receivedin the last quarter of the year on the basis of its investments and by the decline in thedeferred tax liability. The aforementioned tax-related entries are allocated to the last quarter.

In 2001, net profit after the deduction of minority interest grew by 81% compared withthe previous year, rising to EUR 93.0 million (51.5) and its share of net sales to 11.5%(8.4%). Earnings per share increased to EUR 1.40 (0.80), 74% higher than a year earlier.

Return on investmentand return on equity, %

50

40

30

20

10

0

0100999897

23.8

ROI ROE

25.7

Equity ratio, %

60

50

40

30

20

10

0

0100999897

57.6

52

B O A R D O F D I R E C T O R S ’ R E P O R T O F O P E R A T I O N S I N 2 0 0 1

Investments riding high, balance sheet structure strongThe Group’s total investments rose to EUR 248.6 million (162.6) during the report year.Of this amount, EUR 123.1 million (46.8) was earmarked for Finland and the rest, EUR125.5 million (115.9), for BBH. The most significant investment site in Finland is the Lahticentralisation investment, which accounts for slightly over 75% of investments in Finland.Other investments worth mentioning are the acquisition of rights to the Pommac brand anddrinks dispensers and vending machines. BBH’s investments continue to focus on establish-ing growth potential by stepping up production and distribution capacity in Russia andUkraine. The most significant investment in the Baltic countries comprised the acquisitionof the Svyturys brewery and its merger into the Utenos Alus brewery.

Due to the heavy investment programme, the cash flow before financing remainednegative during the report year as well, coming in at EUR -47.1 million (-45.4). Interest-bearing liabilities grew by EUR 27.5 million to EUR 211.8 million. The primary sourcesof funding were leasing and lines of credit. Net debt in turn grew by EUR 65.3 million toEUR 185.0 million, with liquid assets declining by EUR 37.9 million to EUR 26.8 million.

The balance sheet structure strengthened, with the equity ratio rising to 58% from lastyear’s figure of 55%. The gearing ratio in turn rose slightly to 34% due to the growth in netdebt, while it had been 27% a year earlier.

Group structureThe company’s fully-owned subsidiary Cool Drinks International Ltd. Oy was merged into itsparent company on 31 July 2001.

The associated company BBH sold its holding in the Lithuanian Kalnapilis brewery on8 October 2001 so that it could merge its Utenos Alus brewery with the Svyturys brewery,which is owned by Carlsberg Breweries A/S, and thereby avoid the emergence of a dominantmarket position. The merger was carried out in January 2002 and BBH’s share of the newcompany is 44%. In November, the St Petersburg-based Baltika brewery made an agreementto purchase 50% + one of the shares in the Krinitsa brewery, located in Minsk, Belorussia;the agreement negotiations are still ongoing. Likewise in November, BBH acquired half ofCarlsberg Breweries A/S’s 99.9% holding in the Vena brewery in St Petersburg. BBH holdsan option to purchase the rest of the shares owned by Carlsberg Breweries A/S starting on1 October 2003. In addition, BBH has increased its holding in the Russian Pikra brewery to61%. BBH increased its stake in the Ukrainian Slavuta malt house from 82% to 86%.

After the closing date, BBH has announced that it has agreed to acquire a 70% holdingin Voronezh Brewery, located in the town of Voronezh in Southern Russia, by meansof a directed issue. BBH Baltika has also announced that it has started up the constructionof a brewery in Samara, Russia.

The Group’s sales volumeThe Hartwall Group’s sales volume was 1,605.7 million litres (1,319.0 million litres),up 21.7%. The favourable climate in the summer season raised the Group’s full-year salesvolume to a new record level in both Finland and in BBH’s territories.

Trend in the Group’s aggregate sales, 2001

million litres change, %

Finland 376.3 2.2

Exports and duty-free 37.6 3.6

BBH (50%) 1,191.8 30.3

Total 1,605.7 21.7

Gearing, %

50

40

30

20

10

0

0100999897

34.2

53

B O A R D O F D I R E C T O R S ’ R E P O R T O F O P E R A T I O N S I N 2 0 0 1

Summer heat stimulates thirst in FinlandThe sunny summer was a boon to the brewing and soft drinks industry, whose sales volumegrew by 1.7%, or by close to about 14 million litres, compared with the previous year. Theindustry sold a total of 833.6 million litres of products (819.5 million litres). Consumptionincreased in all product groups with the exception of long drinks. The largest growth wasonce again seen in mineral waters and ciders.

Hartwall retained its position as Finland’s largest beverage manufacturer. The company’saggregate market share strengthened slightly, hitting 45.1% (44.9%). During the report year,the company made strong outlays on the development of all its product groups, in terms ofproduct development, packaging development and marketing alike. Hartwall strengthened itsposition in all product groups with the exception of beers.

Beer sales in Finland were up 1.5% to 408.5 million litres (402.3 million litres). In spiteof the favourable trend in this product group, Hartwall did not achieve its set goals and thecompany’s market share declined to 44.6% (46.1%). During the report year, the companylaunched a new beer, Urho IV, and devoted considerable effort to the product development,marketing and sales of its beers.

Cider consumption continued to grow, although at a considerably slower rate than inprevious years. The share of the field’s aggregate sales accounted for by ciders remains atits former level of 6.2%. Sales of ciders totalled 51.4 million litres (50.0 million litres).Hartwall’s market share in this product group strengthened somewhat, coming in at 33.3%(32.8%). The Hartwall Upcider product family, which was launched in 2000, was roundedout with new flavours and multi-bottle packaging alternatives.

Sales of long drinks came in at 16.9 million litres (17.2 million litres). Hartwallstrengthened its market share to 66.2% (61.6%). As the report year was drawing to a close,Hartwall launched a new long drink, Otto, with which the company seeks to turn thedeclining long drink market back into growth.

Last year, mineral water consumption registered the highest growth of all the beveragegroups. Sales by the industry rose by 4.3% to 59.5 million litres (57.0 million litres).Hartwall’s market share strengthened to 51.4% (50.4%). The company’s most popularmineral water is still Hartwall Novelle, whose product family was rounded out with newflavoured waters. The packaging of Hartwall Solina was redesigned to be closer to consum-ers’ ideas of what a spring water bottle should look like.

The industry’s sales of soft drinks grew by slightly under 1.5% to 297.2 million litres(293.0 million litres). Hartwall’s market share strengthened to 45.5% (43.3%). Thecompany sold 73.8 million litres (68.5 million litres) of Hartwall products and 61.5 millionlitres (58.5 million litres) of Pepsi products. The look of the Hartwall Jaffa family - handsdown the company’s most popular soft drink family - was revamped and standardised.Towards the end of the year, Hartwall launched a new product group, health drinks. Thereare now two types of Hartwall Fenix beverages: enlivening and restorative.

BBH’s sales volume sets a new recordMarket growth remained strong in BBH’s territories. The beer market grew by 18% in Russia,16% in Ukraine and 5% in the Baltic countries. BBH’s growth outpaced that of the marketin all of its territories and the company’s aggregate sales volume (100%) was 2,383.5 millionlitres (1,828.7 million litres). Of this amount, 2,281.4 million litres (1,749.7 million litres)were beer and 102.1 million litres (79.0 million litres) were soft drinks and mineral waters.

Earnings/share

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0

0100999897

0.900.72 0.80

1.40

euro

0.76

54

B O A R D O F D I R E C T O R S ’ R E P O R T O F O P E R A T I O N S I N 2 0 0 1

Trend in BBH’s aggregate sales, million litres

2001 2000 Change, %

The Baltic countries 217.2 198.7 9.3

Russia 1,907.2 1,433.9 33.0

Ukraine 259.0 196.1 32.1

Total 2,383.5 1,828.7 30.3

In BBH’s largest market area, Russia, the beer market amounted to 6,146 million litresduring the review period. BBH’s aggregate sales volume in Russia was 1,907.2 million litres(1,433.9 million litres), representing growth of 33%. Beers accounted for 1,871.8 millionlitres (1,404.2 million litres) of this figure. BBH’s share of the Russian beer market strength-ened from 26.7% to 29.8%, and the company is the undisputed market leader.

In Ukraine, BBH’s sales grew by 32% to 259 million litres (196 million litres), of which221.1 million litres were beer (171.6 million litres) and 37.9 million litres were soft drinks(24.4 million litres). The Ukrainian beer market developed by 16% and amounted to 1,200million litres. BBH’s breweries strengthened their positions, raising their share of the beermarket to 18.0% (17.0%). BBH bottles Pepsi in Ukraine.

During the review period, the beer markets of the Baltic countries amounted to a totalof 424 million litres. The Lithuanian beer market evolved 5%, the Latvian market 6% andthe Estonian market 4%. The combined sales volume of BBH’s breweries was 217.2 millionlitres (198.7 million litres), of which 188.6 million litres (173.9 million litres) were beer and28.6 million litres (24.8 million litres) were soft drinks.

In Estonia, the Saku brewery’s share of the beer market was 49.0% (48.0%). In Latvia,the low quality beer segment - which is sold in plastic bottles - has cut into sales of Aldarisbeers, and the brewery’s share of the beer market declined to 45.0% (47.0%). In Lithuania,the situation of BBH’s breweries cleared up, and the combined share of the beer market heldby the Utenos Alus and Svyturys breweries was 45%.

Share capital, shares and shareholdersOn the basis of the warrants attached to the issue of bonds with warrants floated in 1994,a total of 125,000 Series A Shares were subscribed for in September in accordance with thesubscription terms. After the increase, the company’s share capital rose to EUR 13,240,140which is divided into 66,200,700 shares, each having a countervalue of EUR 0.20. OyjHartwall Abp’s shares are divided into 7,400,000 Series K Shares and 58,800,700 Series AShares.

Structure of the share capital, 31 December 2001

No. of shares Votes

Series K Shares 7,400,000 148,000,000

Series A Shares 58,800,700 58,800,700

Total 66,200,700 206,800,700

In November, Orkla ASA divested itself of its 21.2% holding in Hartwall, as required by Finland’s Office of Free Competition. Hartwall-Yhtiöt acquired the 1,500,000 Series KShares owned by Orkla. After this deal, Hartwall-Yhtiöt Oy’s share of the share capital roseto 11.8% and its share of the voting rights to 71.8%. Hartwall-Yhtiöt is fully under thecontrol of the Hartwall family. The 12,535,700 Series A Shares owned by Orkla were solda day later to a large group of Finnish and foreign investors through Helsinki Exchanges.

Share turnover accelerated following the increase in the free float. During the reportyear, 32.6 million of the company’s Series A Shares were traded. The value of share turnoverwas slightly under EUR 670 million. The traded shares represented 55.4% (16.7%) of allthe Series A Shares.

The share price hit a low of EUR 15.0 on 1 March and 2 March, and a high of EUR 24.1on 3 December. The average price during the financial year was EUR 20.57. The final share

55

B O A R D O F D I R E C T O R S ’ R E P O R T O F O P E R A T I O N S I N 2 0 0 1

price in trading on 28 December 2001 was EUR 22.9. At the end of the review period, therewere 6,323 (6,230) shareholders, with foreign ownership of Series A Shares being 34.9%(38.6%).

On 17 December 2001, the company sold the Series A Shares on the company’s jointbook-entry account on behalf of the shareholders in accordance with the decision taken bythe Annual General Meeting held on 29 March 2000. There were 16,290 shares in all thatwere sold at a price of EUR 23.12. The company has deposited the monies from the sale,minus the costs incurred, with the Provincial Government of Uusimaa.

Annual General Meeting 2002The Board of Directors resolved that shareholders will be invited to the Annual GeneralMeeting, to be held at 17:00 on Monday, 8 April 2002, at the Hartwall Areena in Helsinki.The matters specified in Article 11 of the Articles of Association will be dealt with at themeeting.

PersonnelIn 2001, the Hartwall Group employed an average of 6,491 people (6,355), including50% of BBH’s personnel. At year’s end, the payroll was as follows:

Breakdown in the number of personnel

31.12.2001 31.12.2000 change

Hartwall 1,435 1,313 +122

BBH (100%) 10,443 9,510 +933

Oyj Hartwall Abp’s profit-sharing fund, whose members are employees of Hartwall andits Finnish subsidiaries, has been operational since the beginning of 1999. The profit bonusto be paid for 2001 is EUR 1,1 million. BBH’s breweries employ their own incentive andbonus schemes.

Board of Directors, Managing Director and AuditorsThe number of Board members was reduced from eight to seven, and the following membersof the former Board of Directors were re-elected for another term of office: Gustav v. Hertzen(chairman), Erik Hartwall (vice chairman), L.J. Jouhki, Henrik Therman and Björn Mattsson,with Pertti Hernesniemi and Erkki Kilpinen as personnel representatives. L.J. Jouhki resignedfrom the Board of Directors in June. The company’s managing director for the entire financialperiod was Jussi Länsiö and the auditors elected by the Annual General Meeting were SixtenNyman, Authorised Public Accountant, and KPMG Wideri Oy Ab.

Outlook for 2002It is expected that the Hartwall Group’s net sales and operating profit will grow in 2002,too, in spite of the uncertainty holding sway in the general economic outlook. No significantmarket growth is anticipated in the beer and cider product groups in Finland. On the otherhand, the market for mineral waters and soft drinks is forecast to grow slightly. Hartwall’saggregate sales in Finland are expected to grow in step with market growth, with net salesgrowing at a slightly faster rate.

Market growth is anticipated to remain strong in BBH’s market areas, particularly Russiaand Ukraine, albeit slower than in the report year. BBH’s objective is to consolidate itsmarket position, at which point its sales volume will most likely exceed market growth.It has been assessed that prices can be raised in accordance with inflation.

Investments will still remain at a high level in 2002, increasing net debt and financialexpenses. The company has decided to float a bond loan in the spring to strengthen itsfinancial position.

The above estimates are based on the assumption that no significant changes will takeplace in the main currencies of BBH’s territories.

Peronnel, average

BBH (50%) Hartwall

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

0100999897

3,422

4,165

5,341

6,355 6,491

1,39

32,

029

1,36

12,

804

1,38

13,

960

1,37

74,

978

1,44

65,

045

56

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Income statements

EUR million Group Parent company

1.1.-31.12.2001 1.1.-31.12.2000 1.1.-31.12.2001 1.1.-31.12.2000

1) Net sales 807.6 612.0 301.8 281.9

Change in inventories of finished goodsand work in progress +/- 22.2 5.0 2.2 -3.2

2) Other operating income 8.8 4.6 1.7 5.8

3) Materials and services -366.5 -264.3 -129.6 -122.34) Personnel costs -105.3 -82.7 -55.8 -49.47) Depreciation and write-downs -62.6 -52.5 -18.7 -17.2

Other operating expenses -141.7 -119.3 -79.9 -71.7

-676.1 -518.8 -284.0 -260.6

Operating profit 162.5 102.8 21.7 23.920.1% 16.8% 7.2% 8.5%

8) Financial income and expenses -11.5 -7.9 3.0 4.2

Profit before extraordinary items 151.0 94.9 24.7 28.118.7% 15.5% 8.2% 10.0%

9) Extraordinary items -1.2 -0.9

Profit before appropriations and taxes 151.0 94.9 23.5 27.2

10) Appropriations -1.7 3.111) Income taxes -25.5 -24.7 -5.9 -8.1

Minority interests -32.6 -18.7

Profit for the financial year 93.0 51.5 15.9 22.1

11.5% 8.4% 5.3% 7.8%

57

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Balance sheet

EUR million Group Parent company

Assets 1.1.-31.12.2001 1.1.-31.12.2000 1.1.-31.12.2001 1.1.-31.12.2000

Non-current assets12) Intangible assets 52.2 35.3 32.2 16.613) Tangible assets 595.9 455.7 179.9 141.214.3) Investments 2.0 1.1 1.0 1.014.1,14.2) Shares in Group companies 5.9 3.3 64.6 63.4

656.0 495.4 277.7 222.3

Current assets18) Inventories 114.1 106.0 48.2 49.919) Receivables (long-term) 1.7 1.8 1.0 1.320,21) Receivables (short-term) 139.8 126.4 112.1 119.922) Deferred tax assets 3.1 2.2 3.1 2.0

Deposits (short-term) 8.0 49.8 49.4Cash in hand and at the banks 18.8 14.9 5.9 8.2

285.6 301.0 170.5 230.6

941.6 796.4 448.2 452.9

Shareholders’ equity and liabilities

23,24) Shareholders’ equityShare capital 13.2 13.2 13.2 13.2Share premium fund 135.3 135.0 135.3 135.0Other reserves 34.4 35.4Retained earnings 155.4 125.5 59.8 50.8Net profit of the year 93.0 51.5 15.9 22.1

Shareholders’ equity 431.4 360.7 224.3 221.2

Minority interests 109.7 74.4

25) Appropriations 42.9 41.2

26) Provisions 10.8 6.8 10.8 6.8

Liabilities27) Deferred tax liabilities 20.3 15.0 2.9 2.928,29) Non-current creditors (long-term) 130.4 104.4 47.9 62.530,31) Current creditors (short-term) 239.0 235.0 119.2 118.2

389.7 354.4 170.1 183.7

941.6 796.4 448.2 452.9

58

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Cash flow statements

EUR million Group Parent company

1.1.-31.12.2001 1.1.-31.12.2000 1.1.-31.12.2001 1.1.-31.12.2000

Cash flow from operating activitiesOperating profit 162.5 102.8 21.7 23.9Adjustments to operating profit 52.8 48.7 18.3 14.8Change in working capital -4.8 -21.7 10.9 -5.5Interest paid -9.7 -8.7 -4.0 -6.1Dividends received 0.0 0.0 2.7 2.9Interest received 3.5 1.1 1.6 2.5Taxes paid -34.8 -21.3 -7.3 -4.7

Cash flow from operating activities 169.6 101.0 43.8 27.8

Cash flow from investing activitiesInvestments in Group companies -8.0 -5.3 -2.5 -1.3Capital expenditure ontangible and intangible assets -237.4 -143.5 -81.2 -19.8Proceeds from disposal oftangible and intangible assets 4.3 4.6 0.6 3.3Sold Group companies 18.1 – – –Capital expenditure on other investments – 0.0 – 0.0Proceeds from disposal of other investments 0.0 1.4 0.0 1.4Loan receivables from associated companies 2.8 -4.3 7.9 -8.6Interest received from investments 3.5 0.8 2.1 1.7

Cash flow from investing activities -216.7 -146.3 -73.1 -23.3

Cash flow before financing activities -47.1 -45.3 -29.3 4.5

Cash flow from financing activitiesLong-term loans drawn down 52.9 56.2 0.1 27.8Long-term loans repaid -36.5 -16.1 -9.5 -7.9Change in long-term receivables 0.2 -0.2 0.2 -0.2Change in short-term loans 11.0 -18.5 0.5 -46.5Dividends paid -17.4 -11.4 -13.1 -10.1Group contributions received and paid -0.9 -1.1Rights issue 0.3 77.3 0.3 77.3Other 0.0 0.0 0.0 0.0

Cash flow from financing 10.5 87.2 -22.4 39.1

Change in cash and cash equivalents -36.6 41.9 -51.7 43.6Cash and cash equivalents 1 January 64.6 22.9 57.6 14.0Exchange rate differencesin cash and cash equivalents -1.2 -0.2

Cash and cash equivalents 31 December 26.8 64.6 5.9 57.6

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ObjectiveThe Group has a financing policy that is approved by the Boardof Directors and which defines accountability, authorisationsin financing tasks and the principles to be observed in managingfinancial risks. In addition, the subgroup formed by BBH hasa foreign exchange policy that is approved by its Board of Direc-tors and takes into account the special features of the operatingenvironment. The goal of financing policy is to hedge financingrisks in such a way that the Group’s liquidity, net profit andsolvency are not jeopardised. Central objectives in this respect are:

■ safeguarding the Group’s liquidity■ maintaining the agreed balance sheet structure/solvency■ managing interest cover■ managing foreign exchange and interest rate risk■ maintaining a good corporate image in the

financial markets.

The following principles are observed in managing the mostimportant financing risks.

Spreading riskThe principle underlying the sharing of operational responsibilityfor financing is the planning of operations so that the capital tiedup in fixed assets and working capital is optimal from thestandpoint of costs and the flexibility of operations, and thedefinition of the short-term financing requirement for operationsor the financing surplus they generate. The task of finance is tosatisfy the financing requirement of business operations via anoptimal risk/cost ratio or to invest the surplus in liquid and secureinstruments.

Interest rate riskThe interest rate risk position is defined on the basis of theaverage maturity of net debt. On this basis, risk limits are also setfor the net risk positions of individual maturities. In analysinginterest rate risk, financial leasing and interest rate-linked leaseagreements are also considered as interest rate risks. The sought-for interval of the maturity has been set at 6 to 12 months.

Foreign exchange riskForeign exchange risk is examined as both a transaction risk anda translation risk. The significance of translation risks is fairlyminor because the business is centred in domestic markets andFinland has joined the EMU. On the other hand, the translationrisk, which is managed with the aim of hedging the Group’sshareholders’ equity and reserves, is more significant, since BBHoperates mainly in national economies where the trend in inflation

Financing risks and their management

is strong and the financial markets are in their infancy. In theseconditions, the use of financial risk management instrumentsis limited or expensive. Accordingly, BBH’s translation risk ismanaged by applying the so-called monetary-non-monetarymethod in the consolidated annual accounts concerning thebreweries in Russia and Ukraine and by employing operationalmeans to bring financial assets and liabilities into balance.

Liquidity riskTo ensure liquidity in exceptional circumstances, the Group musthave a sufficient liquidity reserve, consisting of cash funds,revolving credit facilities and loan commitments, to cover anyliquidity requirements, including those in unexpected situations.

Credit riskA special feature of the brewing industry is the large proportionof excise taxes in the taxable invoicing. Unlike value-added tax(VAT), the excise tax included in any credit loss must be borneby the brewery. The principle observed in sales on credit is todefine customer-specific credit risks and to require security forthe receivable.

Counterparty riskInvestments and derivative contracts can be made only withseparately defined counterparties, within separately agreed limits.

EuroThe Group adopted the euro as a home currency during February2001. Due to the structure of the customer base, invoicing inFinland was performed in Finnish markka until the end of 2001.

Foreign currency ratesIn preparing the consolidated annual accounts, the followingexchange rates have been used in consolidating BBH and itssubsidiaries:

Official exchange rates

Foreign currency Average exchange rate Exchange rate on balance sheet date

2001 2000 change 31 Dec. 31 Dec. change(%) 2001 2000 (%)

EUR/EEK 15.758 15.684 0.5 15.648 15.631 0.1

EUR/LTL 3.593 3.697 -2.8 3.493 3.695 -5.5

EUR/LVL 0.566 0.561 0.9 0.549 0.567 -3.2

EUR/RUB 26.204 25.997 0.8 26.260 26.013 0.9

EUR/SEK 9.281 8.472 9.5 9.301 8.831 5.3

EUR/UAH 4.824 5.029 -4.1 4.626 5.020 -7.8

EUR/USD 0.896 0.923 -3.0 0.881 0.930 -5.3

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Notes to the financial statements

1 Net sales by market areaGroup Parent company

2001 2000 2001 2000

Finland 307.1 280.9 290.4 269.2Sweden 8.4 10.0 8.4 10.0Russia, the Baltic countries,the Ukraine 491.5 320.4 2.3 2.0Other 0.7 0.7 0.7 0.7

Total 807.6 612.0 301.8 281.9

2 Other operating incomeGroup Parent company

2001 2000 2001 2000

Gain on sales of fixed assets 8.5 2.0 0.4 2.5Other 0.3 2.6 1.3 3.3

Total 8.8 4.6 1.7 5.8

3 Materials and servicesGroup Parent company

2001 2000 2001 2000

Materials and suppliesPurchases during the financial year 272.4 235.9 76.2 83.0Change in inventories 14.0 -23.4 3.9 -7.7

286.4 212.5 80.1 75.4

External services 80.1 51.8 49.5 46.9

Total 366.6 264.3 129.6 122.3

4 Personnel costsGroup Parent company

2001 2000 2001 2000

Wages, salaries and bonuses 78.2 64.4 42.9 39.5Pension costs 9.2 7.2 8.3 6.5Other wage-related costs 17.9 11.1 4.6 3.4

Total 105.3 82.7 55.8 49.4

5 Wages and salaries paidGroup Parent Company

2001 2000 2001 2000

Managing Director andmembers of the Board 1.8 1.2 0.4 0.4Others 75.1 63.1 42.0 38.9

Total 76.9 64.3 42.4 39.4

The retirement age of managing directors of companies belonging to the Group has

been set at 60-65 years. The retirement age of the managing director of the parent

company is 60 years. There were no loan receivables from members of the Board of

Directors or the managing director.

6 Average number of personnelGroup Parent company

2001 2000 2001 2000

Salaried 611 597 586 571Hourly-paid 835 780 835 779

Finland, total 1,446 1,377 1, 421 1,350

BBH (100%) 10,090 9,955

7 Depreciation and write-downsGroup Parent company

2001 2000 2001 2000

Goodwill 3.6 3.1 – –Other capitalised expenditure 4.2 4.0 3.5 3.3Buildings and constructions 7.6 5.2 5.3 2.9Machinery and equipment 47.2 40.3 9.9 11.0

Total 62.6 52.5 18.7 17.2

8 Financial income and expensesGroup Parent company

2001 2000 2001 2000

Share of the results ofassociated companies 0.8 0.2 – –Dividend income

From associated companies 0.0 2.6 2.9From others 0.1 0.1

Total 0.9 0.2 2.7 2.9

Other interest and financial incomeFrom Group companies – – – –From associated companies 1.6 1.3 3.0 2.6From others 15.1 13.6 1.1 4.8

Total 16.6 14.9 4.1 7.4

Interest and other financial expensesTo Group companies – – – –To others -29.1 -23.0 -3.8 -6.2

Total -29.1 -23.0 -3.8 -6.2

Financial income and expenses, total -11.5 -7.9 3.0 4.2

Financial income and expensesincluding exchangerate differences, net -4.6 -1.4 -0.1 1.1

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Notes to the financial statements

9 Extraordinary itemsGroup Parent company

2001 2000 2001 2000

Losses from mergers – – -0.4 –Group contributions given – – -0.8 -0.9

Total – – -1.2 -0.9

10 AppropriationsParent company

2001 2000

Difference between depreciation according to planand depreciation in taxation -1.7 3.1

Total -1.7 3.1

11 Income taxesGroup Parent company

2001 2000 2001 2000

Income taxes on extraordinary items 0.2 0.3Income taxes for currentand previous years -29.1 -25.5 -7.2 -8.6Change in deferred taxes 3.7 0.8 1.2 0.2

Total -25.4 -24.7 -5.8 -8.1

BBH has from the beginning of 2001 accounted for the deferred tax liability accor-ding to Swedish Financial Accounting recommendations section RR9. Thus, BBH’s taxliability related to fixed assets valued according to the monetary-non-monetarymethod is from the year 2000 and the years before registered as a decrease ofretained earnings.

MOVEMENTS IN FIXED ASSETS

12 Intangible assets

12.1 Other capitalised expenditureGroup Parent company

2001 2000 2001 2000

Opening balance, 1 January 46.2 41.0 54.3 48.7Translation difference 0.2 -0.1 – –Increases 20.7 6.0 19.2 5.8Decreases -0.4 -0.8 -0.1 -0.1

Acquisition cost, 31 December 66.7 46.2 73.4 54.3

Accumulated depreciation, 1 January -29.2 -25.4 -37.7 -34.5Translation difference -0.2 0.1 – –Accumulated depreciationon decreases and transfers – 0.1 – 0.1Depreciation according to plan -4.2 -4.0 -3.5 -3.3

Accumulated depreciation,31 December -33.5 -29.2 -41.2 -37.7

Book value, 31 December 33.2 17.0 32.2 16.6

12.2 Goodwill on consolidationGroup

2001 2000

Opening balance, 1 January 26.8 19.6Translation difference -1.1 -0.5Increases 5.5 7.8Decreases -0.3 –

Acquisition cost, 31 December 30.9 26.8

Accumulated depreciation, 1 January -8.6 -5.8Translation difference 0.3 0.3Depreciation according to plan -3.6 -3.1

Accumulated depreciation,31 December -11.9 -8.6

Book value, 31 December 19.0 18.2

12.3 Intangible assets, totalGroup Parent company

2001 2000 2001 2000

Opening balance, 1 January 73.0 60.6 54.3 48.7Translation difference -0.9 -0.6 – –Increases 26.2 13.8 19.2 5.8Decreases -0.7 -0.8 -0.1 -0.1

Acquisition cost, 31 December 97.6 73.0 73.4 54.3

Accumulated depreciation, 1 January -37.8 -31.1 -37.7 -34.5Translation difference 0.2 0.4 – –Accumulated depreciationon decreases and transfers – 0.1 – 0.1Depreciation according to plan -7.8 -7.1 -3.5 -3.3

Accumulated depreciation,31 December -45.4 -37.8 -41.2 -37.7

Book value, 31 December 52.2 35.2 32.2 16.6

13 Tangible assets

13.1 Land and waterGroup Parent company

2001 2000 2001 2000

Opening balance, 1 January 24.0 23.8 16.5 16.4Translation difference 0.1 – – –Increases 2.4 0.2 2.4 0.1Decreases – 0.0 – –Transfers 3.1 0.0 3.1 –

Acquisition cost, 31 December 29.6 24.0 22.0 16.5

Accumulated depreciation, 1 January -7.0 -7.0 – –

Accumulated depreciation,31 December -7.0 -7.0 – –Revaluations 2.7 2.7 2.7 2.7

Book value, 31 December 25.3 19.7 24.7 19.2

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Notes to the financial statements

13.2 Buildings and constructionsGroup Parent company

2001 2000 2001 2000

Opening balance, 1 January 159.1 146.3 80.7 80.2Translation difference -3.2 -1.9 – –Increases 56.8 16.0 43.1 1.0Decreases -4.6 -2.0 -0.6 -1.4Transfers 8.9 0.8 6.4 0.8

Acquisition cost, 31 December 217.0 159.1 129.6 80.7

Accumulated depreciation, 1 January -50.2 -46.7 -33.9 -32.0Translation difference 0.4 0.4 – –Accumulated depreciationon decreases and transfers 0.5 1.2 0.5 1.0Depreciation according to plan -7.6 -5.2 -5.3 -2.9

Accumulated depreciation,31 December -56.8 -50.2 -38.7 -33.9Revaluations 7.5 7.5 7.5 7.5

Book value, 31 December 167.7 116.4 98.4 54.2

13.3 Machinery and equipmentGroup Parent company

2001 2000 2001 2000

Opening balance, 1 January 472.2 397.,6 202.5 198.3Translation difference -9.1 -5.2 – –Increases 132.4 85.0 3.6 4.8Decreases -8.6 -6.4 0.1 -1.8Transfers 1.5 1.2 1.5 1.2

Acquisition cost, 31 December 588.4 472.2 207.7 202.5

Accumulated depreciation,1 January -223.2 -190.8 -154.0 -144.8Translation difference 2.,7 2.0 – –Accumulated depreciationon decreases and transfers – 5.8 – 1.8Depreciation according to plan -47.2 -40.3 -9.9 -11.0

Accumulated depreciation,31 December -267.7 -223.2 -163.9 -154.0

Book value, 31 December 320.7 249.0 43.8 48.5

13.4 Advance payments and construction in progress

Opening balance, 1 January 70,7 27,5 19,3 5,2Translation difference -2,3 -0,6 – –Increases 28,0 45,9 4,8 16,1Decreases -0,7 – – –Transfers -13,6 -2,0 -11,1 -2,0

Acquisition cost, 31 December 82,1 70,7 13,0 19,3

13.5 Tangible assets, totalGroup Parent company

2001 2000 2001 2000

Opening balance, 1 January 726.1 595.2 319.0 300.1Translation difference -14.5 -7.7 – –Increases 219.6 147.1 53.9 22.0Decreases -13.9 -8.4 -0.5 -3.2Transfers -0.1 – -0.1 –

Acquisition cost, 31 December 917.2 726.1 372.3 319.0

Group Parent company2001 2000 2001 2000

Accumulated depreciation,1 January -280.4 -244.5 -187.9 -176.8Translation difference 3.1 2.5 – –Accumulated depreciationon decreases and transfers 0.5 7.0 0.5 2.8Depreciation according to plan -54.8 -45.4 -15.2 -13.9

Accumulated depreciation,31 December -331.6 -280.4 -202.6 -187.9Revaluations 10.2 10.2 10.2 10.2

Book value, 31 December 595.9 455.8 179.9 141.2

14 INVESTMENTS

14.1 Shares in subsidiariesGroup Parent company

2001 2000 2001 2000

Opening balance 2.0 0.7Increases – 1.1Decreases -1.3 –Transfers – 0.2

Book value, 31 December 0.7 2.0

14.2 Shares in associated companiesGroup Parent company

2001 2000 2001 2000

Opening balance, 1 January 3.3 1.7 61.5 61.4Translation difference 0.4 0.0 – –Increases 2.2 1.8 2.5 0.2Decreases – -0.2 – –Transfers – – – -0.2

Book value, 31 December 5.9 3.3 64.0 61.5

14.3 Other shares

Opening balance, 1 January 1.1 1.4 1.0 1.4Translation difference 0.0 – – –Increases 0.9 0.1 – –Decreases – -0.3 – -0.3

Book value, 31 December 2.0 1.1 1.0 1.0

14.4 Investments, totalGroup Parent company

2001 2000 2001 2000

Opening balance, 1 January 4.4 3.1 64.5 63.5Translation difference 0.4 0.0 – –Increases 3.0 1.8 2.5 1.3Decreases – -0.5 -1.3 -0.3

Book value, 31 December 7.9 4.4 65.7 64.5

15 Carrying value of production machinery and equipment270.8 211.4 38.8 42.8

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Notes to the financial statements

16 RevaluationsGroup Parent company

2001 2000 2001 2000

Land and water, 1 January 2.7 2.8 2.7 2.8Buildings and constructions, 1 January 7.5 7.5 7.5 7.5Deductions of land areas – -0.1 – -0.1Land and water, 31 December 2.7 2.7 2.7 2.7Buildings and constructions,31 December 7.5 7.5 7.5 7.5

17 Shares and participationsNumber Holding % Par Book

of shares value valueof shares of shares

Parent company Group

Group companies owned directlyby the parent company 1,000 1,000

FIM EUR

Hartwa-Trade Oy Ab 23,807 100.00 100.00 200 508Lapin Kulta Oy 100 100.00 100.00 17 17Helepark Oy 402 100.00 100.00 7 7Kiinteistö OyRistipellontie 13 1,908 100.00 100.00 2 172

703Associated companiesAsunto OyAnkkurisaarentie 22 750 50.00 50.00 3 522Baltic BeveragesHolding AB 500,000 50.00 50.00 50,000 SEK 57,693Baltika-Don, Russia 2,345 928OAO Yarpivo,Russia 2,700 0.35 0.35 69 RUB 362OAO Baltika Brewery,Russia 13,595 0.90 0.90 842 RUB 4,442

63,947

Hartwa-Trade Oy Ab´s subsidiariesNumber Holding, % Par Book

of shares value valueof shares of shares

Lindtrade Oy Ab 10,000 100.0 8 581Nahedor Oy 130 100.0 11 581

1,162

Baltic Beverages Holding AB’s subsidiariesHolding, % BBH’s

BBH Group book value

1,000 SEKSaku Ölletehase AS, Estonia 75.00 37.50 82,059A/S Aldaris, Latvia 75.00 37.50 108,271AB Utenos Gerimai, Lithuania 99.00 49.50 98,364AB Svyturys-Utenos Alus, Lithuania 43.81 21.91 161,437OAO Baltika Brewery, Russia 75.51 37.76 222,949OAO Yarpivo, Russia 60.00 30.00 132,965OAO Tula Brewing, Russia 73.62 36.81 218,823OAO Zolotoy Ural(former Chelyabinskpivo), Russia 75.00 37.50 120,678OAO Slavutich Brewery, Ukraine 81.45 40.73 192,375OAO Slavuta Malt House, Ukraine 59.89 29.95 23,556OAO L’vivska Pivovarnya, Ukraine 99.65 49.83 229,684OAO Pikra, Russia 60.60 30.30 224,136Baltic Beverages Eesti, Estonia 100.00 50.00 252Baltic Breweries Invest AB, Sweden 100.00 50.00 100Baltic Bewerages Holding Oy, Finland 100.00 50.00 29

1,815,678

Baltic Beverages Holding AB’s associated companies

Holding, % BBH’s Group’sBBH Group book value book value

1,000 SEK 1,000 EUR

Saku Linnas, Estonia 100.00 50.00 2,322 125Litmalt, Lithuania 50.00 25.00 28,924 1,555Soufflet, Russia 30.00 15.00 38,535 2,072

69,781 3,751

Other shares and participationsBook value (1, 000 EUR)

Number Par value Parent company’s Indirectof shares of shares direct ownership ownership

Helsinki-Halli Oy, Series A 24 40 404Jokerit HC Oy 101,000 170 336Hex Oy, Helsinki Exchanges 24,400 41 34Suomen Palautuspakkaus Oy 200 34 34Other shares and participations 221 92

Total 1,029 92

18 InventoriesGroup Parent Company

2001 2000 2001 2000

Raw materials and consumables 58.0 72.0 26.3 30.2Semi-finished goods 7.1 5.0 1.6 1.4Finished goods 49.0 28.9 20.3 18.3

114.1 106.0 48.2 49.9

19 Receivables, long-termGroup Parent Company

2001 2000 2001 2000

Loan receivables 1.7 1.8 1.0 1.2

20 Receivables, short-termGroup Parent Company

2001 2000 2001 2000

Accounts receivable 88.2 73.3 72.8 65.1Receivables from Group companies

Trade receivables 0.1 2.3Other receivables 0.2 0.1Prepaid expensesand accrued income – 2.4

0.3 4.8Receivables from associated companies

Accounts recevable 0.2 0.8 0.2 1.5Loan receivables 17.5 21.5 35.1 43.0Other receivables 0.0 – – –Prepaid expensesand accrued income 0.0 0.2 0.1 0.4

17.8 22.4 35.4 44.9

Other receivables 16.6 19.2 0.2 1.0Prepaid expensesand accrued income 17.3 11.6 3.4 4.0

33.9 30.7 3.6 5.0

Long-term receivables, total 139.9 126.4 112.1 119.9

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Notes to the financial statements

21 Prepaid expenses and accrued incomeGroup Parent Company

2001 2000 2001 2000

Advance payments to suppliers 7.4 5.1 – –Tax receivables 6.5 2.7 1.4 1.1Other prepaid expensesand accrued income 3.4 3.9 2.1 5.7

Total at the end of the period 17.3 11.7 3.5 6.8

22 Deferred tax assetsGroup Parent Company

2001 2000 2001 2000

Deferred tax assets dueto timing differencies 3.1 2.2 3.1 2.0

23 Shareholders’ equityGroup Parent Company

2001 2000 2001 2000

Share capital, 1 January 13.2 12.1 13.2 12.1Rights issue 1.1 1.1

Share capital, 31 December 13.2 13.2 13.2 13.2

Share premium fund, 1 January 135.0 58.8 135.0 58.8Issue premium 0.3 76.2 0.3 76.2

Share premium fund, 31 December 135.4 135.0 135.4 135.0

Other funds, 1 January 35.4 36.4Translation difference -1.0 -1.0

Other funds, 31 December 34.4 35.4

Retained earnings, 1 January 177.1 137.8 73.0 61.1Dividend paid -13.1 -10.1 -13.1 -10.1Donations 0.0 0.0 0.0 0.0Revaluations -0.1 – -0.1Translation difference -3.8 -2.0 – 0.0Change in BBH’sdeferred tax liability -4.7 – – –

Retained earnings, 31 December 155.4 125.5 59.8 50.8

Net profit for the financial period 93.0 51.5 15.9 22.1

24 Distributable shareholders’ equity, 31 DecemberGroup Parent Company

2001 2000 2001 2000

Retained earnings 155.4 125.5 59.8 50.8Net profit for the financial period 93.0 51.5 15.9 22.1Equity part ofaccumulated difference -30.5 -29.3 – –Other change -1.4 -1.4 -1.4 -1.3

Distributable shareholders’equity, 31 December 216.6 146.4 74.4 71.6

25 Accumulated appropriationsParent Company

2001 2000

Accumulated depreciation difference,1 January 41.2 44.3Change in depreciation difference 2000 1.7 -3.1

Accumulated depreciation difference,31 December 42.9 41.2

26 ProvisionsGroup Parent Company

2001 2000 2001 2000

Product, can and bottle costs 2.7 4.4 2.7 4.4Personnel expenses 3.6 2.5 3.6 2.5Other 4.5 – 4.5 –

Total 10.8 6.8 10.8 6.8

27 Deferred tax liabilitiesGroup Parent Company

2001 2000 2001 2000

Deferred taxes on depreciationdifference and voluntary reserves 12.5 12.0 – –Deferred taxes on revaluations 2.9 2.9 2.9 2.9Deferred taxes from timing differencies 4.8 – – –Deferred taxes fromconsolidation entries 0.1 0.1 – –

Total 20.3 15.0 2.9 2.9

28 Long-term liabilitiesGroup Parent Company

2001 2000 2001 2000

Loans from financial institutions 30.1 39.6 30.1 39.6Pension loans 10.9 12.6 10.9 12.6Other long-term liabilities 34.1 30.2 6.9 10.3Leasing loans 55.3 22.1 – –

Total 130.4 104.4 47.9 62.5

29 Liabilities falling due after five yearsGroup Parent Company

2001 2000 2001 2000

Loans from financial institutions 10.9 8.4 1.7 8.4Pension loans 4.2 5.9 4.2 5.9Other non-current loans 0.0 0.0 0.0 0.0Leasing loans 17.6 1.6 – –

Total 32.7 15.9 5.9 14.3

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Notes to the financial statements

30 Short-term liabilitiesGroup Parent Company

2001 2000 2001 2000

Loans from financial institutions 13.1 4.7 13.1 4.7Pension loans 1.7 1.7 1.7 1.7Advances received 2.6 3.8 – –Accounts payable 48.7 56.4 21.9 27.8Next year’s leasing payments 11.8 9.6 – –

77.8 76.2 36.7 34.1

Liabilities to the Group companiesAccounts payable – – – 0.1Other liabilities – – 9.4 12.3Accrued liabilities and prepaid income – – – –

0.0 0.0 9.4 12.4

Liablities to othersOther liabilities 76.3 79.5 6.8 7.3Accrued liabilitiesand prepaid income 84.9 79.4 66.3 64.3

161.1 158.8 73.1 71.6

Short-term liabilities 239.0 235.0 119.2 118.2

31 Accrued liabilities and prepaid incomeGroup Parent Company

2001 2000 2001 2000VAT liabilities 14.0 14.7 11.7 13.0Excise tax liabilities 29.5 29.2 25.2 25.8Tax liabilities 0.6 2.1 – –Wages, salaries and social expenses 10.5 9.0 10.2 8.7Other accrued liabilities 30.2 24.4 19.2 16.8

Total 84.9 79.3 66.3 64.3

32 Contingent liabilitiesGroup Parent Company

31.12. 31.12. 31.12. 31.12.2001 2000 2001 2000

Mortgages as collateralfor own commitmentsMortgages on real-estate 68.6 67.8 68.6 67.8Rental rights 2.3 2.4 2.3 2.4Machinery 51.5 52.2 – –Inventories 3.6 5.1 – –Deposits – 0.6 – –Corporate mortgages 25.2 25.2 25.2 25.2

Total 151.2 153.3 96.1 95.4

Guarantees as collateral for other commitmentsGroup Parent Company

2001 2000 2001 2000

GuaranteesOn behalf of management – – – –On behalf of shareholders 0.0 0.0 0.0 0.0On behalf of Group companies – – 3.0 2.2On behalf of associated companies 4.2 3.8Other 2.0 2.0 1.9 2.0

Repurchase commitments 0.7 1.1 0.7 1.1

Total 6.9 6.9 5.6 5.3

Leasing commitmentsGroup Parent Company

2001 2000 2001 2000

Real-estate leasing commitmentsLeasing rents tobe paid in next year 1.6 2.0 1.6 2.0Leasing rents tobe paid thereafter 1.4 3.9 1.4 3.9

Other leasing commitments *)Leasing rents tobe paid in next year 13.8 11.1 13.4 11.1Leasing rents tobe paid thereafter 56.8 25.5 56.7 25.5

Repurchase commitments 4.2 1.7 4.1 1.7

Total 77.8 44.1 77.2 44.1

Total, all 235.8 204.4 178.9 144.9

*) Other leasing commitments are included in liabilities in the consolidated balance sheet.

Derivative agreements 31 December 2001par value current value Balance sheet value

Interest rate swap 10.0 0.20 -Interest rate futures 30.0 0.03 -Interest rate option

purchased 30.0 0.01 -sold 30.0 0.01 -

Loans with guaranteesGroup Parent Company

31.12. 31.12. 31.12. 31.12.2001 2000 2001 2000

Loans with mortgagesas collateral

Loans from financial institutions 79.4 74.8 52.2 58.6Other short-term loansCredir limits, 63.5 45.5 57.2 37.8of which used on 31 December 10.7 5.1 1.8 –

Loans, total 90.1 79.9 54.0 58.6

Mortgages as collateral,total 151.2 153.3 96.1 95.4

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H A R T W A L L A N N U A L R E P O R T 2 0 0 1

The Hartwall Group’s financial statements have been prepared inaccordance with the Finnish accounting regulations that came intoforce on 31 December 1997.

Principles of consolidationThe consolidated financial statements comprise the parentcompany together with all the subsidiaries of Oyj Hartwall Abp(voting rights > 50%) as well as all the associated companies ofOyj Hartwall Abp (voting rights 20-50%). The acquired subsidiar-ies and associated companies are included in the consolidatedfinancial statements as from the date of acquisition. The consoli-dated financial statements have been prepared in accordance withthe purchase method of accounting. In eliminating intra-Groupshareholding, the shareholders’ equity of subsidiaries is consid-ered to be the shareholders’ equity and untaxed provisions on theacquisition date less liability deferred tax. The difference arisingon elimination is allocated to fixed assets to the extent that thefair value of a subsidiary’s fixed assets exceeds the book valueon the acquisition date. In the consolidated balance sheet theremainder of the acquisition cost of the shares is allocated togoodwill. The portion allocated to fixed assets has been amortisedaccording to the depreciation plan for the underlying asset.The goodwill arising from acquisitions is depreciated on a strait-line basis in the consolidated accounts over its expected life, butnevertheless for a maximum of ten years.

Internal transactions and unrealised profits as well as internaldistributions of profits have been eliminated.

Minority interests have been disclosed from the Group’sshareholders’ equity and net profit, and are stated as a separateitem.

Of the associated companies, Baltic Beverages Holding AB,which is half-owned, has been consolidated using the proportion-ate method, whereby the consolidation has involved the inclusionof 50% on all the lines of the profit and loss account and thebalance sheet of the companies in question. The other associatedcompanies have been consolidated according to the equitymethod, whereby the proportional from the owned company’snet profit and equity is included in the consolidated financialstatements also taking into account the profits on internaltransactions.

The income statement of the associated company BBH hasbeen translated into Finnish markka amounts using the averageexchange rate during the financial period, whereas the balancesheet items, with the exception of the net profit, have beentranslated using the exchange rate on the closing day of thefinancial period. Changes due to exchange rate fluctuations havebeen booked directly to shareholders’ equity.

The associated company BBH has used the so-calledmonetary-non-monetary method in consolidating its subsidiariesin Russia and the Ukraine because they operate in countries wherehigh inflation prevails and where the financial markets are in anearly state of development. According to this method, the stocks,current assets and creditors in the balance sheet are translatedat the exchange rates prevailing at the balance sheet date, orat a lower exchange rate on the preparation date of the financialstatements, while the other items in the balance sheet aretranslated at the exchange rate ruling at the date of the transac-tion. Items in the profit and loss account are translated at theaverage exchange rate during the financial period, except fordepreciation and the change in stocks, which are translated atthe exchange rates ruling at the date of the transaction.Translation differences are credited or charged to income for thefinancial period. In addition, retained earnings reported by BBH’ssubsidiaries have been translated using the exchange rates in theaforementioned annual accounts, and the difference has beentransferred from retained earnings to non-distributable funds.

Net salesIndirect taxes, discounts granted and exchange rate differenceshave been subtracted from invoiced amounts when calculatingnet sales.

Receivables and liabilities denominated in foreign currencyReceivables and liabilities denominated in foreign currency arevalued in the balance sheet at the exchange rate on the balancesheet date. Exchange rate differences are credited or charged tothe income for the period.

R&D expenditureR&D expenditure has been expensed in the financial year whenincurred.

Accounting principles

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InventoriesInventories are stated at the lower of cost or net realisable value,whichever is lower. The acquisition cost of manufacturedinventories includes not only direct costs but also a portion ofthe indirect costs of acquisition and production.

Fixed assetsFixed assets are valued in the balance sheet at the direct acquisi-tion cost less depreciation according to plan. In addition, thebalance sheet value includes revaluations - which are itemisedin the Notes to the annual accounts - on certain land areas andbuildings. Revaluations reversed are subtracted directly fromshareholders’ equity in the balance sheet. Revaluations are basedon the values prevailing at the time of revaluation.

Fixed assets are depreciated according to plan using straight-line method over their estimated useful lives. The Group’sguidelines regarding typical useful lives are:

■ Goodwill on consolidation 5–10 years■ Other capitalised expenditure 2–20 years■ Buildings 20–50 years■ Constructions 5–20 years■ Machinery and equipment 3–15 years

LeasingCommodities leased under financial leasing agreements arepresented as fixed assets in the consolidated annual accounts,and related obligations as interest-bearing liabilities. Leasingobligations on real-estate are presented in the notes to the annualaccounts, and the rents paid are presented in rent costs.

Pension expensesThe statutory pension liability and related benefits of the parentcompany and subsidiaries are handled through outside pensioninsurance companies. The pension insurance payments areaccrued to correspond to the amount of wages and salaries.

Extraordinary income and expensesThe impacts of the changes in accounting principles on previousfinancial years and other significant items not related to normalbusiness operations are presented as extraordinary income orexpenses.

AppropriationsAppropriations include changes in the difference between finan-cial and fiscal depreciation. In the consolidated balance sheet, theamount of accumulated appropriations has been divided betweenshareholders’ equity and deferred tax liability. The changes inappropriations over the financial period have, correspondingly,been divided between the net profit for the year and the changein the deferred tax liability in the profit and loss account.

ProvisionsProvisions are balance sheet items representing contractual orother commitments that have not yet been realised. Changes inobligatory provisions are included on the relevant lines of theprofit and loss account.

Direct taxesIn the income statement income taxes include taxes which havebeen calculated, on the basis of local tax legislation, from theresults of the Group companies during the financial year, correc-tions of prior years’ taxes and changes in deferred taxes.

The deferred tax liability or asset is calculated for the timingdifferences between taxation and the annual accounts, using thetax base confirmed for the following years at the date of closing.The balance sheet includes the deferred tax liability in full, andthe deferred tax asset is recognised only to the extent it isconsidered to realise a future tax savings.

DividendsThe dividend proposed by the Board of Directors is not recordedas a liability in the financial statements. The dividends are takeninto account on the basis of a decision taken by the AnnualGeneral Meeting.

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Key indicators for the Group

Income statement 1997 1998 1999 2000 2001

Net sales EUR million 445.3 486.7 467.0 612.0 807.6Change, % % 32.4 9.3 -4.0 31.1 32.0

Operating profit EUR million 95.5 94.3 76.6 102.8 162.5percentage of net sales % 21.4 19.4 16.4 16.8 20.1

Profit/loss before extraordinary items EUR million 94.5 80.7 73.1 94.9 151.0percentage of net sales % 21.2 16.6 15.7 15.5 18.7

Profit before taxes EUR million 92.7 82.4 73.1 94.9 151.0percentage of net sales % 20.8 16.9 15.7 15.5 18.7

Net profit of the year EUR million 52.7 45.7 46.0 51.5 93.0percentage of net sales % 11.8 9.4 9.8 8.4 11.5

Balance sheet

Non-current assets EUR million 229.7 308.0 393.4 495.4 656.0Inventories EUR million 65.9 68.6 77.5 106.0 114.1Receivables EUR million 77.3 100.2 120.5 130.4 144.7Short-term deposits EUR million 9.8 0.0 0.8 49.8 8.0Cash in hand and at the bank EUR million 12.9 9.7 22.2 14.9 18.8

Shareholders’ equity EUR million 171.7 196.7 245.1 360.7 431.4Minority interest EUR million 39.5 42.2 55.4 74.4 109.7Provisions EUR million 7.7 10.5 5.9 6.8 10.8Deferred tax liabilities EUR million 13.9 15.8 16.0 15.0 20.3Long-term liabilities EUR million 28.6 31.1 63.0 104.4 130.4Short-term liabilities EUR million 134.3 190,2 229.0 235.0 239.0Total assets EUR million 395.7 486.6 614.4 796.4 941.6

Interest-bearing liabilities EUR million 46.2 104.0 164.8 184.3 211.8Non-interest bearing liabilities EUR million 130.6 133.2 143.2 170.1 177.9

Key ratios

Return on equity ( ROE) % 36.8 24.4 21.4 19.1 25.7Return on investment ( ROI) % 40.6 29.2 19.7 19.5 23.8Interest cover 38.0 24.8 15.7 14.9 18.4Equity ratio % 54.1 49.2 49.0 54.9 57.6

Gearing ratio % 11.1 39.4 47.2 27.5 34.2

Gross capital expenditure on fixed assets EUR million 68.7 102.8 125.2 162.6 248.6percentage of net sales % 15.4 21.1 26.8 26.6 30.8

R&D expenditure EUR million 1.4 1.4 1.8 2.0 2.0percentage of net sales % 0.3 0.3 0.4 0.3 0.2

Personnel, average (BBH 50%) 3,422 4,165 5,341 6,355 6,491Hartwall 1,393 1,361 1,381 1,377 1,446BBH (100%) 4,057 5,608 7,919 9,955 10,090

Formulas for the indicators

Return on equity, ROE profit/loss after financial items less taxesshareholders’ equity + minority interest, average for the accounting period

Return on investment, ROI profit/loss after financial items + interest and other financing expensesbalance sheet total less non-interest-bearing liabilities less obligatory provisions,average for accounting period

Interest cover profit/loss after financial items + depreciations + interest and other financial expensesinterest and other expenses

Equity ratio shareholders’ equity + minority interestbalance sheet total less prepayments

Gearing ratio interest-bearing liabilities less cash and bankshareholders’ equity + minority interest

Personnel, average the average end-of-month number of personnel

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Share-issue adjusted indicators

1997 1998 1999 2000 2001

Earnings per share (EPS) euro 0.90 0.72 0.76 0.80 1.40Equity per share euro 2.83 3.24 4.03 5.45 6.52Dividend per share

Series A Share euro 0.1346 0.1514 0.1682 0.20 1.11*)Series K Share euro 0.1312 0.1480 0.1648 0.19 1.10*)

Dividend pay-out ratio % 14.8 20.7 22.1 25.5 78.9

Series A ShareEffective dividend yield % 0.9 1.1 1.2 1.0 4.8P/E ratio 16.85 19.16 19.03 25.66 16.30Adjusted share priceAverage euro 10.46 18.31 12.39 18.65 20.57

Low euro 6.69 7.67 10.00 14.15 15.00High euro 16.31 35.20 15.95 24.20 24.10Year-end price euro 15.14 13.88 14.40 20.50 22.90

Trading volume 1,000 shares 13,805 17,332 10,967 9,755 32,567Series A Shares, total % 26.1 32.7 20.7 16.7 55.4

Market capitalisation at year-endSeries A Shares EUR million 806.3 740.2 768.2 1,205.0 1,346.5Series K Shares EUR million 112.0 102.7 106.6 151.7 169.5Total EUR million 918.3 842.8 874.7 1,356.7 1,516.0

Adjusted average number of shares Series A Share 1,000 shares 53,268 53,344 53,344 57,127 58,801Total 1,000 shares 60,668 60,744 60,744 64,527 66,201

Adjusted average number of shares at year endSeries A Shares 1,000 shares 53,268 53,344 53,344 58,782 58,801Total 1,000 shares 60,668 60,744 60,744 66,182 66,201

* Proposal of the Board of Directors

Formulas for the indicators

Earnings per share (EPS) profit/loss after financial items less taxes less minority interestadjusted average number of shares for the year

Equity per share adjusted shareholders’ equityadjusted number of shares at year-end

Dividend per share dividend paidadjusted number of shares at year-end

Dividend pay-out ratio dividend paidprofit/loss after financial items less taxes less minority interest

Effective dividend yield dividend per shareadjusted share price at year-end

P/E ratio adjusted share price at year-endEPS

Market capitalisation number of shares at year-end times the share price on the same date

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On 31 December 2001, the Group’s non-restricted equityaccording to the consolidated balance sheet amounts to EUR248,400,401.69 of which distributable funds amount to EUR216,568,482.51.

The parent company’s non-restricted equity according to thebalance sheet as at 31 December 2001 was as follows:

74,371,029.51

The number of shares entitled to a dividend is 66,200,700 shares.

Proposal for the distribution of profit

Helsinki, 13 February 2002

Gustav von Hertzen Erik Hartwall Pertti Hernesniemi

Erkki Kilpinen Björn Mattsson Henrik Therman

Jussi LänsiöManaging Director

The Board of Directors proposes that the distributable funds bedisposed of in the following manner:

payment to shareholders of a dividend for 2001 of:

EUR 1.11 on the Series A Share EUR 65,268,777.00EUR 1.10 on the Series K Share EUR 8,140,000.00

EUR 73,408,777.00

to be set aside for benevolent purposesat the discretion of the Board of Directors EUR 35,000.00

remainder transferred to retained earnings EUR 927,252.51

To the shareholders of Hartwall PlcWe have audited the accounting, the financial statements and theadministration of Hartwall Plc for the year ended 31 December2001. The financial statements, which include the report of theBoard of Directors, consolidated and parent company incomestatements, balance sheets, cash flow statements and notes to thefinancial statements, have been prepared by the Board of Direc-tors and the Managing Director. Based on our audit we expressan opinion on these financial statements and on administration.

We have conducted the audit in accordance with FinnishStandards on Auditing. Those standards require that we performthe audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An auditincludes examining on a test basis evidence supporting theamounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by the

Auditors’ report

management, as well as evaluating the overall financial statementpresentation. The purpose of our audit of administration is toexamine that the Board of Directors and the Managing Directorhave complied with the rules of the Companies Act.

In our opinion, the financial statements have been preparedin accordance with the Accounting Act and other rules andregulations governing the preparation of financial statements.The financial statements give a true and fair view, as defined inthe Accounting Act, of both the consolidated and parent compa-ny’s result of operations, as well as of the financial position.The financial statements with the consolidated financial state-ments can be adopted and the members of the Board of Directorsand the Managing Director of the parent company can bedischarged from liability for the period audited by us.The proposal made by the Board of Directors on how to deal withthe distributable funds is in compliance with the Companies Act.

Helsinki, 27 February 2002

KPMG WIDERI OY ABSixten Nyman Lasse Holopainen

Authorized Public Accountant Authorized Public Accountant

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Share capitalOyj Hartwall Abp’s share capital totalled EUR 13,240,140 at theend of 2001. In accordance with the subscription terms, 125,000Series A Shares were subscribed on the basis of warrants fromthe issue of bonds with warrants floated in 1994. The increaseof EUR 25,000 in the share capital was recorded in the TradeRegister on 4 September 2001.

In November, as requested by Finnish competition authorities,the Norwegian company Orkla relinquished its 21.2% share inHartwall. The 1,500,000 Series K Shares owned by Orkla werepurchased by Hartwall-Yhtiöt. As a result of this transaction, theshare of Oyj Hartwall Abp held by Hartwall-Yhtiöt rose to 11.8%and Hartwall-Yhtiöt’s share of voting rights rose to 71.8%.On the day following this transaction, 12,535,700 of the Series AShares owned by Orkla were sold to a large number of Finnishand foreign investors.

Oyj Hartwall Abp’s share capital at the end of 2001 consistsof 66,200,700 shares (7,400,000 Series K Shares and 58,800,700Series A Shares), each of which has a counter value of EUR 0.20.The company’s Series A Share has been quoted on the HelsinkiExchanges since 1 July 1994.

At the general meeting of shareholders, Series A Shares carryone vote and Series K Shares 20 votes. The dividend paid onSeries A Shares is at least two percentage points higher than thedividend on Series K Shares.

Structure of share capital, 31 December 2001

Number of shares Votes

Series K Shares 7,400,000 148,000,000

Series A Shares 58,800,700 58,800,700

Total 66,200,700 206,800,700

Information concerning shares in Oyj Hartwall Abp

Share turnoverThe increase of the company’s shares on the market from 32%to some 56% speeded up the trading of shares. Turnover of SeriesA Shares in 2001 totalled EUR 669.8 million, and represented55.4% (16.7%) of the total number of Series A Shares. At theend of the year there were 6,323 shareholders (6,230 in theprevious year). Foreign ownership was 34.9% (38.6%).The turnover and prices for Series A Shares were as follows:

Turnover and prices for Series A Shares 1 Jan. - 31 Dec. 2001

EUR number of shares

Turnover 669,845,366 32,566,943

Low (1 and 2 March 2001) 15.00

High (3 Dec) 24.10

Average 20.57

Closing quotation 28 Dec 2001 22.90

Shareholder categories, 31 December 2001

Number of owners Number of shares Voting rights

Households and

private individuals 5,655 26,996,361 26,996,361

Companies 414 9,977,525 150,577,525

Financial institutions

and insurance companies 48 2,353,470 2,353,470

Public sector entities 54 4,886,032 4,886,032

Non-profit bodies 87 379,493 379,493

Foreigners, total *) 50 21,607,819 21,607,819

Grand total 66,200,700 206,800,700

*)includes

nominee-registered shares 8 21,375,894 21,375,894

Hartwall's share monitor 1 July 1994 to 31 december 2001.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

Hartwall

HEX-index

EUR

1.7.

94

1.10

.94

1.1.

95

1.4.

95

1.7.

95

1.10

.95

1.1.

96

1.4.

96

1.7.

96

1.10

.96

1.1.

97

1.4.

97

1.7.

97

1.10

.97

1.1.

98

1.4.

98

1.7.

98

1.10

.98

1.1.

99

1.4.

99

1.7.

99

1.10

.99

1.1.

00

1.4.

00

1.7.

00

1.10

.00

1.1.

01

1.4.

01

1.7.

01

1.10

.01

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Information concerning shares in Oyj Hartwall Abp

Breakdown of ownership 31 Dec. 2001

Number of Shareholders Percentage Number Percentageshares / shareholder of shares of holding

1-99 1,256 19.9 46,613 0.07

100-999 4,178 66.1 1,215,462 1.84

1 000-9 999 725 11.5 1,490,683 2.25

10 000-99 999 110 1.7 3,744,371 5.66

100 000-999 999 42 0.7 14,655,992 22.14

more than 1 000 000 13 0.2 45,047,579 68.05

Number outstanding 66,200,700 100.00

Management’s shareholding 31 December 2001

(Board of Directors, Managing Director, Deputy Managing Director)

- percentage of shares 4.0%

- percentage of voting rights 1.3%

20 largest shareholders, 31 December 2001

Number Percentage Percentage ofof shares of holding voting rights

Hartwall-Yhtiöt Oy

- Series K Shares 7,400,000 11.2 71.6

- Series A Shares 413,100 0.6 0.2

Total 7,813,100 11.8 71.8

Hartwall P.G., estate 5,306,000 8.0 2.5

Local Government

Pensions Institution 2,168,465 3.3 1.0

Hartwall Gösta, estate 1,677,600 2.5 0.8

K.Hartwall Invest Oy Ab 1,557,075 2.4 0.7

Therman Robert 1,500,140 2.3 0.7

Ilmarinen Mutual

Insurance Company 1,336,050 2.0 0.6

Therman Mattias 1,325,000 2.0 0.6

Hartwall Erik 1,258,050 1.9 0.6

Hartwall John 1,186,300 1.8 0.6

Therman Henrik 970,590 1.5 0.5

Tallqvist Gustav 902,335 1.4 0.4

Therman Anna 719,400 1.1 0.3

Hartwall Helmi, estate 651,600 1.0 0.3

Hartwall Peter 628,150 0.9 0.3

Roos Catharina 525,900 0.8 0.3

Hartwall Victor 520,050 0.8 0.2

Hartwall Kaj-Erik 515,366 0.8 0.2

Tallqvist Nicklas 485,500 0.7 0.2

Alsi Pia 474,000 0.7 0.2

20 largest, total 31,520,671 47.7 82.8

Insider regulationsOn 28 August 2000, Oyj Hartwall Abp resolved to adopt theHelsinki Exchanges’ Guidelines for Insiders as the company’sinsider regulations.

Dividend policyOyj Hartwall Abp’s objective is - while taking earnings for theyear into consideration - to pay steady regular dividends thatamount to approximately 25% of long-term net profit.

Average share price and number of shares traded by month, 2001

18.53

16.23

23.2619.12

19.4520.79

21.1419.35

16.41

17.92

18.81

0.00

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20.00

25.00

January February March April May June July August September October November December0

300,000

600,000

900,000

1,200,000

1,500,000

1,800,000

2,100,000

2,400,000

2,700,000

3,000,000EUR

21.4421.44

Number of sharesAverage price

number of shares

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ABG Sundal Collier & CoTorgeir Vaage, phone +47 22 0160 54

Aktia SecuritiesSabah Samaletdin,phone +358 9 010 247 5000

Alfred Berg Finland Oyj AbpTia Lehto, phone+358 9 2283 21

CAI CheuvreuxFrans Hoyer, phone +44 20 7621 5172

Carnegie FinlandKia Aejmelaeus, phone +358 09 6187 1230

Cazenove & CoHenrik Olsson, phone + 44 20 7588 2828

Conventum Securities LtdHannu Nyman, phone +358 09 2312 3311

Analyst contacts

Credit Suisse First BostonIan Shackleton, phone +44 20 7888 6883

Danske SecuritiesPeter Kondrup, phone +45 33 4470 30

Deutsche BankNick Bevan, phone +44 20 7545 8000

Enskilda SecuritiesTommy Ilmoni, phone +358 9 6162 8700

Evli Pankkiiriliike OyjAntti Seppänen, phone +358 9 4766 9632

FIM Pankkiiriliike OyMikko Linnanvuori, phone +358 9 6134 6353

Handelsbanken Investment BankingTom Skogman, phone +358 10 4442 752

According to the information received by us, the banking companies and investment analysis firms listed

below keep track of Oyj Hartwall Abp’s financial performance of their own accord. The list might be

incomplete. Updates to the list will be posted on our site at www.hartwall.fi. Oyj Hartwall Abp is not

responsible for any opinions these companies put forth concerning the company.

HSBC Investment Bank PlcSimon Hales, phone +44 20 7336 2643

Impivaara Securities LtdJeffery Roberts, phone +44 20 7284 3937

Mandatum Pankkiiriliike OyAri Laakso, phone+358 10 2364 710

Nordea Securities OyjTimo Jaakkola, phone +44 20 7808 5773

Opstock Investment BankingJari Räisänen, phone +358 9 4044 408

Schroder Salomon Smith BarneyCharles Winston, phone +44 20 7968 4270

UBS WarburgFredrik Liljewall, phone +46 8 4537 313

Principles of investor communicationsOyj Hartwall Abp’s investor relations activities are systematic, continuous and active.By means of long-term activities, investor relations aim to generate financial informationto help the market to define the value of the share and maintain share prices at a level thatreflects the company’s position and outlook as accurately as possible. The goal of operationsis to ensure that there is always sufficient information available on the market to allow thecompany’s real value to be ascertained.

Contact information:Marie-Louise Wiklund, Corporate Communications Manager,marie-louise.wiklund@hartwall.fi, phone + 358 9 540 2440

Agneta Selroos, Corporate Communications Officer,agneta.selroos@hartwall.fi, phone +358 9 540 2515

Markku Sirén, CFO,markku.siren@hartwall.fi, phone +358 9 540 2384

Trading code: HAR, HARAS.HE

Internet: www.hartwall.fi/hartwall for investors/

Investor relations

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1 § The company’s business name is Oyj Hartwall Abp and it isdomiciled in Helsinki. The company’s business name in English isHartwall Plc.

2 § The company’s field of business is to engage in the manufactureand sale of mineral waters, juices, malt beverages and soft drinksas well as related activities, and also in the manufactureand sale of other food industry related products. The company alsorents real-estate and apartments or office suites, and carries outother types of leasing activities. The company may also engage inthese activities through subsidiaries and/or associated companies.The company provides these companies with the Group’s jointfinancing, administration and planning services as wellas guides the Group’s joint planning.

3 § The minimum share capital of the company shall be twelvemillion eighty-five thousand euros (EUR 12,085,000) and themaximum share capital forty-eight million three hundred and fortythousand euros (EUR 48,340,000), within which limits the sharecapital may be raised or lowered without amending these Articlesof Association.

The company’s shares belong to the book-entry system.

4 § The company shall have two series of shares: one Series KShares and one Series A Shares; in all, a minimum of 60,425,000shares and a maximum of 241,700,000 shares. The number ofSeries K Shares can be a maximum of 29,600,000 and the numberof Series A Shares a maximum of 241,700,000.

At a General Meeting each Series K Share shall carry twenty(20) votes and each Series A Share one (1) vote.

When an Annual General Meeting resolves to pay a dividend,the dividend paid on Series A Shares shall be at least two (2)percentage points higher than the dividend on Series K Shares.

After the registration date, the right to obtain funds distributedby the company as well as a subscription right in connection withan increase in the share capital shall be limited to:

Oyj Hartwall Abp Articles of Association

1) a shareholder registered in the Shareholder Register onthe record date;2) a holder of the right to payment who is registered, onthe record date, in the book-entry account of a registeredshareholder and in the Shareholder Register; or,3) if a share has been nominee-registered, a shareholder inwhose book-entry account the share is registered on the recorddate and whose custodian is registered as the administrator ofthe share in the Shareholder Register on the record date.After an offer by the Board of Directors, an owner of Series K

Shares shall have the right to demand that the Series K Shareshe owns be converted to Series A Shares in the proportion 1:1.The demand for conversion must be made in writing to thecompany’s Board of Directors. The demand must contain informa-tion on the shares that the shareholder wants to be converted.The Board of Directors must, after the expiry of the offer date,implement without delay the changes in the demand for conver-sion. The conversion must thereafter be filed without delay withthe Trade Register for registration. When the registration has beencarried out, the conversion shall enter into effect.

5 § The company shall have a Board of Directors consisting of aminimum of three (3) and a maximum of ten (10) members, whoshall be elected at the Annual General Meeting to a term of officethat shall expire at the end of the next Annual General Meetingfollowing their election.

The Annual General Meeting shall also elect the Chairman andVice Chairman of the Board of Directors.

The Board of Directors shall convene at the call of its Chairman.Each member of the Board of Directors and the Managing Directorhave the right to request that a meeting be called. The Board ofDirectors shall have a quorum when more than half of its membersare present. A simple majority shall determine the outcome of voting.If voting ends in a tie, the Chairman shall have the casting vote.

Each member of the Board of Directors shall have the right tohave his dissenting opinion recorded in the minutes.

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The notice of meeting must be delivered to each member of theBoard of Directors.

At the proposal of the Chairman, the Board of Directors cantake decisions in writing without convening if the members of theBoard of Directors are unanimous on the decision and sign it.

6 § The Board of Directors shall attend to the administration ofthe company and the appropriate organisation of its activities.

The Board of Directors shall appoint a Managing Directorfor the company.

The Managing Director shall attend to the day-to-day adminis-tration of the company in accordance with the instructions andorders issued by the Board of Directors.

7 § The company’s business name shall be signed by the Chairmanof the Board of Directors and the Managing Director, both alone.

The Board of Directors can grant one or more persons theright to sign the company’s business name either alone or jointlywith another person authorised to sign for the company.

The Board of Directors shall also decide on the granting ofrights of procuration.

8 § The financial year of the company shall be the calendar year.The annual accounts and related documents must be submittedto the company’s auditors for auditing by 31 March at the latest.The auditors must submit their auditors’ report within a month.

9 § The company shall have two to four auditors, at least oneof whom shall be a firm of independent public accountantsauthorised by the Central Chamber of Commerce. The auditorsshall be elected annually at the Annual General Meeting and theirterm of office shall expire at the end of the next Annual GeneralMeeting following their election.

10 § The Annual General Meeting shall be held each year beforethe end of June in Helsinki, Espoo or Vantaa.

The notice of meeting shall be published in at least twonewspapers that are published in Helsinki and which are selectedby the Board of Directors. Shareholders who wish to attend theAnnual General Meeting must register at the location specified inthe Notice of Meeting by the deadline specified therein, which shallbe ten (10) days before the meeting at the earliest.

A shareholder who wishes the Annual General Meeting todeliberate on a certain matter must notify the Board of Directorsof this in writing well in advance so that it can be included in theNotice of Meeting.

11 § The business of the Annual General Meeting shall include:

Presentation of:

1. the annual accounts for the past financial year, comprisingthe Profit and Loss Account, Balance Sheet and the Reportof Operations,

2. the Auditors’ Report.

Decision on:

3. approval of the Profit and Loss Account and Balance Sheet,4. any measures which may be occasioned by the profit or loss

shown in the approved Balance Sheet,5. granting of release from liability to the members of the

Board of Directors and the Managing Director,6. any measures which may be occasioned by the reports of the

Board of Directors and the auditors,7. the payment of a dividend,8. the number of members of the Board of Directors and

the number of auditors,9. the remunerations of the Board of Directors and the auditors.

Election of:

10. the members of the Board of Directors, and the Chairmanand Vice Chairman of the Board,

11. the auditors.

And dealing with:

12. any other matters mentioned in the notice of meeting.

76

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Corporate Governance is defined as an administration system,including among other things, an allocation of work betweenadministration bodies, internal control and information flow, aswell as supervision of shareholders and external interest groups.The basis for the Corporate Governance is the Companies Actand the Articles of Association. The requirement to give notifica-tions is furthermore governed by the Securities Markets Act.

The Board of Directors of Hartwall Plc is responsible forthe appropriate administration and organisation in the HartwallGroup. The Board of Directors consists of 3-10 members, two ofwhich employee representatives. The Annual General Meeting ofShareholders elects the Board of Directors including the Chairmanand the Vice Chairman, for a term of office that ends at the expiryof the subsequent Annual General Meeting of Shareholders. Noneof the Board members is employed on a full time basis.

The Board of Directors meets, as a main rule, six times a year.Every meeting has a given keynote to be discussed: annualaccounts, interim report, strategic plans or annual business plans.The Board decides matters on acquisitions, significant investmentsand divestments, acquisitions of capital, long-term contracts andoperational policies. The minutes are drawn up in Finnish andSwedish.

The Board of Directors appoints the Managing Director andother executive offices. These together constitute the ManagementGroup. The Management Group, headed by the ManagingDirector, is responsible for the drafting of the strategic plan andits implementation. The Managing Director is not a member ofthe Board of Directors but he is present at the meetings.

Corporate governance

The Company has at least two auditors, one of which isapproved by the Central Chamber of Commerce. The auditorsreport to the Board of Directors when the closing of the annualaccounts/interim report is being handled. Additionally the auditorsparticipate, when invited, in the Board Meetings and are present atthe General Meetings of Shareholders. The Board of Directors ismonthly, in due form, informed on the development of the market,profit and financial situation as well as other significant issuesrelating to the business.

A significant part of the Hartwall Group consists of its affiliatecompany Baltic Beverages Holding AB, which is, in equal shares,jointly owned by Hartwall Plc and the Danish Carlsberg BreweriesA/S. A shareholder agreement exists between the owners, which,among other things, governs the decision-making process in theadministration.

The remuneration paid to the members of the Board isannually decided at the General Meeting of Shareholders.The Board of Directors decides the terms of employment for theManaging Director. The remuneration to key persons includes anannual bonus, which is based on targets achieved. The ManagingDirector also participates in an issue of bonds with warrantsprogramme ending in 2001. A profit sharing fund has also beenestablished for the Hartwall Group’s personnel in Finland.

Notifications to shareholders and to stock markets arepublished in accordance with the Companies Act and the Securi-ties Markets Act and they cover, among other things, the annualreports, interim reports, as well as events which might have aneffect on the value of the shares in the Company.

77

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Gustav von Hertzen, born 1930, Honorary Coun-

sellor (a Finnish title), has served as Oyj Hartwall

Abp’s chairman of the Board since 1982.

He is also the chairman of the Board of Hartwall-

Yhtiöt Oy and a member of the Board of Baltic

Beverages Holding AB. Gustav von Hertzen

holds an Master of Science in Engineering.

Erik Hartwall, born 1941, is the managing

director of Hartwall-Yhtiöt Oy and has served

as the deputy chairman of Oyj Hartwall Abp

since 1989. Erik Hartwall is also the chairman

of the Board of K. Hartwall Oy Ab. In addition,

he is a member of the Board of the Finnish Fair

Corporation and Stiftelsen Svenska Handels-

högskolan. Erik Hartwall is the chairman of

the Board of Suomen Jobs & Society and the

chairman of the Valamo Foundation’s council.

Erik Hartwall holds a Bachelor of Science in

Economics.

Board of Directors

Björn Mattsson, born 1941, Honorary Counsellor

(a Finnish title), has been a member of the Board

of Oyj Hartwall Abp since 2000. Björn Mattsson

is the chairman of the Boards of Partek Oyj Abp,

Finvest plc, Patria Industries Oyj and Biotie

Therapies Oyj. He is a member of the Board of

Stiftelsen för Åbo Akademi. He is also the

chairman of the Supervisory Board of Alma

Media Oyj. Björn Mattsson holds a Licentiate

in Philosophy.

Henrik Therman, born 1937, has been a member

of the Board of Oyj Hartwall Abp since 1997.

Henrik Therman is the chairman of the Board

of Baltic Beverages Holding AB. He is also a

member of the Boards of Hartwall-Yhtiöt Oy,

Baltika Brewery Ltd (Russia), Yarpivo Ltd (Russia)

and Hlebnij Dom OAO (Russia). Henrik Therman

holds a Master of Science in Engineering.

Board of Directors, from

left: Henrik Therman,

Jussi Länsiö (Managing

Director, not a member of

the Board), Erik Hartwall,

Björn Mattsson,

Gustav von Hertzen,

Pertti Hernesniemi,

Erkki Kilpinen.

Pertti Hernesniemi, born 1956, is general

trustee at Oyj Hartwall Abp’s Helsinki factory.

He is a member of Oyj Hartwall Abp’s Board

of Directors and has served as an employee

representative since 1995.

Erkki Kilpinen, born 1948, is project planner at

Oyj Hartwall Abp’s factory in Lahti. He has been

a member of the Board and an employee

representative since 1995. He is also the chairman

of the Food Branch of the Union of Technical

Employees.

L.J. Jouhki, born 1944, member of the Board

from 22 April 1997 to 29 June 2001.

Auditors

Sixten Nyman,

Authorised Public Accountant

KPMG Wideri Oy Ab

78

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Jussi Länsiö, born 1952, is Oyj Hartwall Abp’s

managing director. Prior to joining Hartwall

in 1994, Jussi Länsiö worked as the general

marketing manager of Langnese-Iglo GmbH/

Unilever Germany from 1992 to 1994, as the

managing director of Jalostaja Oy Huhtamäki

from 1983 to 1992 and as director of sales &

marketing at Huhtamäki Oy from 1978 to 1983.

He is the deputy chairman of Sonera Oyj and a

member of the Boards of Metsä-Tissue Oyj and

Jokerit HC Oy. Jussi Länsiö is the chairman of the

Board of the Finnish Federation of the Brewing

and Soft Drinks Industry and deputy chairman

of the Board of Finnish Food and Drink

Industries and CBMC Brewers of Europe. Jussi

Länsiö holds a Bachelor of Science in Economics.

Ralf Hollmén, born 1948, is the sales and

logistics director and deputy managing director

of Oyj Hartwall Abp. Prior to joining Hartwall in

1985, Ralf Hollmén worked as the deputy

managing director of Oy Tilgmann Ab from 1983

to 1985 and as that company’s chief financial

officer from 1981 to 1983. From 1978 to 1981,

Ralf Hollmén was the deputy managing director

Executive committee of Oyj Hartwall Abp

and acting managing director of Oy Aerator Ab.

Ralf Hollmén holds a Bachelor of Science in

Economics.

Markku Sirén, born 1948, is Oyj Hartwall

Abp’s finance director and also acts as the

secretary of the Board of Directors. Prior to

joining Hartwall in 1994, Markku Sirén

worked as Suomen Unilever Oy’s deputy

director of finance and financial adminis-

tration from 1992 to 1994. From 1972 to

1992, Markku Sirén worked in numerous

financial administration positions in the

Huhtamäki Group, with his last post being

the Polarcup unit’s director of finance and

administration. Markku Sirén holds

a Bachelor of Science in Economics.

Rolf Therman, born 1943, is the technical

director of Oyj Hartwall Abp. Prior to joining

Hartwall in 1992, Rolf Therman was the

managing director of Oy Ekström Ab from 1986

to 1992. He worked as a head of divisions at Oy

Partek Ab from 1981 to 1986 and at Oy

Hackman Ab from 1975 to 1981. Rolf Therman

holds a Bachelor of Science in Economics and a

Master of Science in Engineering.

Esa Rautalinko, born 1962, is the marketing

and export director of Oyj Hartwall Abp. Prior

to joining Hartwall in 1996, Rautalinko worked

as the managing director and regional director

of Nokia Home Electronics Ltd from 1995 to

1996 and as that company’s sales director from

1993 to 1995. From 1988 to 1993, Esa Rautalinko

worked in numerous marketing and sales

positions in the Huhtamäki Group and Suomen

Unilever Oy, with his last post being the

marketing director of Van den Bergh Foods.

Esa Rautalinko is a member of the Boards of FIM

Rahastoyhtiö Oy and Contineo Oy. He holds a

Master of Science in Economics.

Rolf Therman and Markku SirénJussi Länsiö Ralf Hollmén and Esa Rautalinko

79

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Christian Ramm-Schmidt, born 1946, is the

managing director of Baltic Beverages Holding

AB. Prior to joining BBH, Christian Ramm-

Schmidt worked as the managing director of

Fazer Confectionery, Fazer Chocolates Ltd and

Fazer Biscuits Ltd from 1984 to 1997. He worked

as the marketing director of ServiSystems Oy

from 1979 to 1984, as the marketing manager

of Oy Valitut Palat - Reader’s Digest Ab, Finland,

from 1977 to 1978, the product group manager

of Oy Rank Xerox from 1973 to 1976 and the

sales manager of Oy Victor Ek Ab from 1970 to

1972. Christian Ramm-Schmidt holds a Bachelor

of Science in Economics.

Baltic Beverages Holding AB (BBH) was

established in 1991. This associated company

is owned on a 50-50 basis by Hartwall and the

Danish company Carlsberg Breweries. BBH

is engaged in brewing operations in the Baltic

countries, Russia and Ukraine.

Erik Hartwall is the managing director of

Hartwall-Yhtiöt Oy, which is a holding company

established in 1988 that is the parent company

Parent company, subsidiaries and associatedcompanies and their management

of Oyj Hartwall Abp. All of the owners of

Hartwall-Yhtiöt Oy are the descendants of

Victor Hartwall, the founder of Oyj Hartwall Abp.

Erik Hartwall joined Oy Hartwall Ab in 1971

and served as its managing director from 1976

to 1988.

Markku Tolonen, born 1943, is the managing

director of Hartwa-Trade Oy Ab. Prior to joining

Hartwa-Trade, Markku Tolonen was the director

and commercial director of Oy Hartwall Ab from

1994 to 1998. He was the managing director

of Hartwall Juomat Oy from 1992 to 1994, the

marketing director and director of Orion

Corporation Chymos’ preserves factory from

1981 to 1992 and the sales director and sales

manager of Oy Sinebrychoff Ab from 1971

to 1981. From 1966 to 1971, Markku Tolonen

worked as a warehouse outlet manager and

sales director at Kesko Oy. Markku Tolonen is

a graduate from a commercial college.

Hartwa-Trade Oy Ab is owned by Hartwall and

is an importer and wholesaler of wines and

alcoholic beverages in Finland.

Christian Ramm-Schmidt Erik Hartwall Markku Tolonen

80

H A R T W A L L A N N U A L R E P O R T 2 0 0 1

Hartwall Plc

Group management:

Ristipellontie 4, P.O.Box 31

FIN-00391 Helsinki, Finland

Phone +358 9 540 21

Fax +358 9 540 2453

+358 9 540 2528

(Corporate Communications)

Production sites:

Helsinki

Ristipellontie 4, P.O.Box 31

FIN-00391 Helsinki, Finland

Phone +358 9 540 21

Fax +358 9 540 2453

Karijoki

Marttusentie 100,

FIN-64350 Karijoki, Finland

Phone +358 6 268 0088

Fax +358 6 268 0078

Lahti

Kolkankatu 17, P.O.Box 44,

FIN-15101 Lahti, Finland

Phone +358 3 862 11

Fax +358 3 752 1552

Tornio

Lapinkullankatu 1, P.O.Box 33

FIN-95401 Tornio, Finland

Phone +358 16 433 66

Fax +358 16 433 601

Sales:

Retail Channel

Phone 9800-52332 (Finland only)

Fax +358 9 540 2512

Restaurant Channel

Phone 08001-58662 (Finland only)

Fax +358 9 540 2512

Service Channel

Phone 9800-52332 (Finland only)

Fax +358 9 540 2512

Hartwa-Trade Oy Ab

Konalantie 47 A, P.O.Box 23

FIN-00391 Helsinki, Finland

Phone +358 9 540 21

Fax +358 9 540 2526

Baltic Beverages Holding AB

Head office:

Finland

Mikonkatu 15 B, P.O.Box 119

FIN-00101 Helsinki, Finland

Phone +358 9 5425 2911

Fax +358 9 5425 2900

Sweden

Masugnsvägen 28, Box 20182

S-16102 Bromma, Sweden

Phone +46 8 799 8400

Fax +46 8 291 303

Breweries:

Aldaris Brewery

44 Twaika Str., LV-1005 Riga, Latvia

Phone +371 7023 200

Fax +371 7023 224

Zolotoy Ural Brewery

Ryleeva st. 16

454087 Chelyabinsk, Russia

Phone +7 3512 625100

Fax +7 3512 625112

Baltika Brewery

6 Proezd, 9 kvartal

Promzona, "Parnas-4"

194292, St. Petersburg, Russia

Phone +7 812 3299 100

Fax +7 812 3266 677

Baltika-Don Brewery

146 Dovator Str., Rostov-Na-Don

344000 Russia

Phone +7 8632 22 27 90

Fax +7 8632 92 19 27

Lvivska Brewery

18 Kleparivska Rd.

Lviv, 79007 Ukraine

Phone +380 322 728 711

Fax +380 322 333 461

Pikra Brewery

Ul. 60 let Oktyabrya D 90

Krasnoyarsk, 660079 Russia

Phone +7 3912 610 440

Fax +7 3912 614 888

Saku Brewery

Tallinna mnt. 2

EE - 75501 Saku, Harjumaa

Estonia

Phone +372 6 508 400

Fax +372 6 508 401

Slavutich Brewery

Zapozhnik Str. 3

330076 Zaporozhy, Ukraine

Phone +380 612 412 042

Fax +380 612 425 744

Tulskoje Pivo Brewery

85, Odoevskoye shosse

Tula, 300036 Russia

Phone +7 0872 395 535

Fax +7 0872 395 451

Svyturys Utenos Alus Brewery

Pramones str. 12

LT - 4910 Utena, Lithuania

Phone +370 39 63309

Fax +370 39 69047

Svyturys Utenos Alus Brewery

Kuliy varty g. 7

LT - 5799 Klaipeda, Lithuania

Phone +370 6 484 000

Fax +370 6 484 009

Yarpivo Brewery

63, Pozharskogo Ulitsa

150030 Yaroslavl, Russia

Phone +7 0852 442 508

Fax +7 0852 477 885

Vena Brewery

St. Petersburg, Russia

Postal address: P.O.Box 119,

FIN-53101 Lappeenranta, Finland

Phone +7 812 326 2100

Fax +7 812 326 2122

Contact information

Visual design: Viherjuuren Ilme Oy

Printing: Frenckell Printing Works Ltd